Tesla shares skid after Musk flags recession in China, Europe

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Wedbush Securities managing director Dan Ives tells ‘Varney & Co.’ why he tempered Tesla expectations for Q4 and cut his price target.

Shares of Tesla Inc slid on Thursday, a day after Chief Executive Elon Musk said it was a "little harder" for the electric-vehicle maker to garner demand in the face of a weakening global economy.

At least six brokerages lowered their price targets on the stock, with Tesla bull Wedbush Securities making the biggest cut of $60 to bring its target to $300. Tesla's third-quarter revenue on Wednesday missed analysts' estimates.

Musk told analysts on a conference call on Wednesday that China and Europe are experiencing "a recession of sorts" that are causing demand to be "a little harder than it otherwise would be." But he also said the EV maker has "excellent demand" for the current quarter, although Tesla said it would miss its annual delivery target due to limited transportation capacity.

German Chancellor Olaf Scholz, left, talks to Elon Musk, Tesla CEO, at the opening of the Tesla factory Berlin Brandenburg in Gruenheide, Germany, Tuesday, March 22, 2022. The first European factory in Gruenheide, designed for 500,000 vehicles per ye ((Patrick Pleul/Pool via AP) / AP Newsroom)

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He flip-flopped on demand during a July conference call, saying at first that macroeconomic uncertainty might have some impact on demand for its electric vehicles, but when pressed for details by an analyst, he said the company did not have a demand problem but a production problem.

Tesla cars parked out front of a Tesla gigafactory in Gruenheide, Germany, March 20, 2022. (REUTERS/Hannibal Hanschke/File Photo / Reuters)

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Musk said he had a "super bad feeling" about the economy and that Tesla needed to cut about 10% of staff at the electric carmaker, according to a June email seen by Reuters. Later, he said the reduction would apply only to salaried workers.

TickerSecurityLastChangeChange %
TSLATESLA INC.207.28-14.76-6.65%

Tesla shares have lost more than a third of their value so far this year. The shares were down 6.5% at $207.56 on Thursday afternoon after falling as much as 9% to hit a 16-month low earlier in the session.

"The results will likely add to debates about demand destruction that ensued after 3Q deliveries tracked -5% below company-compiled consensus," JP Morgan said in a report.

TickerSecurityLastChangeChange %
JPMJPMORGAN CHASE & CO.116.13-0.38-0.33%

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Tesla missed automotive gross margin expectations on Wednesday, as costs to ramp up production at its new factories in Berlin and Austin weighed.

CEO of Tesla Motors Elon Musk speaks at the Tesla Giga Texas manufacturing “Cyber Rodeo” grand opening party on April 7, 2022 in Austin, Texas. – Tesla welcomed throngs of electric car lovers to Texas on April 7 for a huge party inaugurating a “gigaf ((Photo by SUZANNE CORDEIRO / AFP) (Photo by SUZANNE CORDEIRO/AFP via Getty Images) / Getty Images)

"The bullish narrative is clearly hitting a rough patch as Tesla must now prove again to the Street that the robust growth story is running into a myriad of logistics issues as opposed to demand softening," Wedbush analyst Daniel Ives said.

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