Panic peaked late last year when Tesla (TSLA) announced a hefty price cut. Markets feared that the electric vehicle leader needed to revive weak demand.
TSLA stock rebounded sharply before and after the earnings report. Revenue rose by 37.2% Y/Y to $24.32 billion. Although free cash flow fell by 48.9% to $1.42 billion, bringing the Cybertruck to market rekindled investor bullishness.
Tesla is expanding its in-house cell production, developing a next-generation vehicle platform, and expanding its manufacturing footprint. Its growth in the energy business complements the core EV segment. Tesla will host an Investor Day in a month and will more detail on its plans then.
Price Cuts
Tesla’s price cut defies the EV trend. Competitors are introducing vehicles at higher price tags. To ensure its customers get a $7,500 tax credit, Tesla cut prices. The average selling price, excluding leases and rent credits, is $47,000. It will sustain a healthy overall operating margin by managing costs. For example, it will achieve operating leverage and achieve efficiency from its overhead. In addition, Tesla’s entry into the higher-priced truck EV market is a growth opportunity.
Your Takeaway
Markets rewarded investors who had faith in Tesla stock late last year. The latest earnings report reaffirms its competitive lead. No other firm may catch up to it at this time.
