Why Is Tesla (TSLA) Stock Down Today?

Tesla (NASDAQ:TSLA) stock fell almost 6% overnight after the company missed revenue expectations for its third quarter. For the three months ending in September, Tesla saw net income of $3.33 billion and earnings per share of 95 cents on revenue of $21.45 billion. Analysts expected revenue of $21.96 billion.

Management blamed a shortage of delivery transport near the end of the quarter for the revenue shortfall. It said the problem is being handled. TSLA stock opened at $208 per share with a market capitalization of $648 billion. Since the start of 2022, Tesla has lost about half its value.

The Transition

Tesla has always been valued as a tech stock, not a manufacturer. Its gross margin for the third quarter under GAAP was 25%, and it had free cash flow of nearly $3.3 billion. It ended the quarter with $21.1 billion in cash.

By comparison General Motors (NYSE:GM) had negative cash flow of $2.26 billion in its second quarter and had a cash balance of $19.2 billion at the end of June.

During the earnings call, CEO Elon Musk also addressed his pending purchase of Twitter (NYSE:TWTR) for $44 billion. He said its value is an order of magnitude more than the market cap. Musk will need to sell some of his own Tesla stock to complete the purchase, which should add to selling pressure.

Tesla is worth more than 10 times auto companies like GM, despite having just 60% of GM’s revenue. That’s because Tesla is scaled to produce electric cars at a profit, it has no legacy gas-powered business and it extracts the maximum value from each sale, having no dealer network and charging for software.

Analysts are split on whether this can continue as car giants around the world gear up their own electric vehicle operations. Over half still have Tesla on their buy lists. But there’s also a consensus rating of “buy” on GM.

What Happens Next for TSLA Stock?

Expect Tesla stock to be under short-term pressure as Musk sells down his holdings. There will also be bearishness over Tesla’s dependence on China and global supply chains. But the company retains its fans, and if revenue continues growing at more than 50% per year, as it did in the third quarter, bulls won’t panic.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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