What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) jumped 6.5% in the pre-market session after the company reported fourth quarter financial results: As is usually the case, the quarter had something for the bulls and something for the bears. On the bullish side, the company reiterated its promise to investors to launch its unsupervised full self-driving (FSD) and Robotaxi businesses later this year. Aside from the short-term results, those excited about the stock continue to argue that quarterly results are less relevant for a company that will revolutionize areas such as energy and humanoid robots.
For the bears, the results themselves provided fodder. Revenue and operating income both fell short of Wall Street's estimates. These misses were driven by underperformance in its Automotive and Energy segments, as Services (which includes full self-driving) actually beat analysts' revenue expectations. However, Services is Tesla's lowest margin business line - it had an extremely bad gross margin of 5.8% for the trailing 12 months, and it fell to 4.2% this quarter. Overall, this is a mixed quarter, and despite these challenges, the market seems to be holding faith in Tesla's long-term vision thus far.
After the initial pop the shares cooled down to $405.69, up 4.6% from previous close.
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What The Market Is Telling Us
Tesla’s shares are extremely volatile and have had 110 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when the stock dropped 4.4% on the news that stocks of electric vehicle makers tumbled following reports that the new Trump Administration may eliminate subsidies for electric vehicles. There are also worries that the Trump administration might impose more restrictions on other programs, including grants and tax credits, which could weaken the adoption of electric vehicles.
Tesla is up 7% since the beginning of the year, but at $405.69 per share, it is still trading 15.5% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $9,496.
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