Benzinga - by Shanthi Rexaline, Benzinga Editor. Tesla, Inc. (NASDAQ:TSLA) stock fell for the fifth consecutive session on Thursday as macroeconomic worries roiled the market.
More importantly, the stock has receded about 25% since the electric vehicle giant reported its second-quarter results on July 19. Much of the weakness is self-inflicted, according to Future Fund Managing Director Gary Black.
Tesla Vs. Mega-Cap Tech Peers: Black shared a chart that highlighted Tesla's underperformance over the past month versus Apple, Inc. (NASDAQ:AAPL), Amazon, Inc. (NASDAQ:AMZN), Alphabet, Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:META), Microsoft Corp. (NASDAQ:MSFT), Nvidia Corp. (NASDAQ:NASDAQ) and the Invesco QQQ Trust (NASDAQ:QQQ).
The QQQ is an exchange-traded fund that tracks the performance of the 100 biggest tech companies.
For those who stubbornly cling to the notion that $TSLA price cuts are somehow good for TSLA valuation, look at $TSLA stock vs peers since TSLA's July 19 conf call, when Elon alarmed investors by warning that he would cut EV prices if int rates continued to rise. pic.twitter.com/uYugnHDZjo— Gary Black (@garyblack00) August 17, 2023
Price Cuts Cop The Blame: Black repeated his view that the underperformance is due to Tesla CEO Elon Musk's comments regarding more imminent vehicle price cuts on the second-quarter earnings call.
Musk walked the talk, with his flagship EV venture announcing price cuts for its Model Y vehicles in China. Cutting configurator prices is different from bringing down inventory vehicle prices, Black said.
Unlike lowering inventory prices, when there is a sense of urgency to capitalize, lowering configurator prices does not send out a sense of urgency, he said. “The lower price is always there,” he added.
“Worse, TSLA is training consumers to think that if they wait, another price cut will come along,” Black said.
Bottom Line At Risk: With price cuts, Tesla's demand is pulled forward and future demand falls as actual demand elasticity is low, Black said. Tesla's average selling price, excluding regulatory credit, has declined 20% year-over-year globally from $56,000 to $45,000, the fund manager said. He also noted that Wall Street's volume estimates are now at 1.843 million, fractionally lower than the year-end.
“This demand elasticity causes Street earnings estimates to plunge,” he said, adding that the 2023 EPS has fallen 36% year-to-date and 41% year-over-year.
The Tesla management doesn't seem to have other tools in its toolkit to balance short-term supply and demand, Black said.
Light At End Of Tunnel? One positive for Tesla is the increasing EV adoption globally, Black said, adding that the company will be the biggest beneficiary.
“TSLA has the best product, the most advanced autonomy, the most visionary CEO, and is moving quickly to expand its TAM by entering two huge segments – pickups and the $25K-$30K segment where all the customers are,” he said.
Future Fund has Tesla as its second-biggest holding. “Please don't tell me to sell my TSLA position,” Black said. He required the management team and board to take a “longer-term view in running its business and invest in educating current legacy auto consumers why they should go EV rather than cutting price.”
Tesla ended Thursday’s session down 2.83% at $219.22, according to Benzinga Pro data. This marked the lowest closing price since June 5.
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