The recent surge in Tesla Inc. TSLA shares has not deterred Mark Hawtin, investment director at GAM Investments, from voicing concerns about the company’s fundamentals and potential demand problems.
What Happened: Despite the positive market response, Hawtin remains skeptical about Tesla’s fundamentals, particularly in light of increasing competition in the EV market. He noted that other automakers are experiencing strong EV sales growth, even as the global auto market is in a downturn.
"The bottom line here is the fundamentals are not good. There's a huge plethora of offerings in the market now for EVs, and Tesla is lagging behind," Hawtin said, CNBC reported.
Hawtin also highlighted potential demand issues stemming from Tesla’s aggressive price cuts, which have led to a drop in used car values and could result in higher leasing costs.
This comes in the wake of Tesla’s earnings release, which saw the company’s stock rise by 24%, partially driven by CEO Elon Musk‘s optimism about robo-taxis and a reported deal with Baidu to introduce driver assistance features in China.
Why It Matters: Tesla’s aggressive cost-cutting measures were highlighted in its Q1 earnings report, where it reported a 9% year-over-year decrease in revenue, missing Wall Street estimates. Recently, the company also announced massive layoffs as a part of Musk’s “hardcore” cost-cutting measure.
Furthermore, Tesla’s optimism about robo-taxis has been met with skepticism. Xpeng Inc.’s Vice Chairman and Co-President Brian Gu suggested that the commercial viability of robotaxis is at least five years away, a timeline notably longer than what Musk has suggested.
Finally, Tesla’s stock saw a boost following news of a potential full self-driving software rollout in China. However, the success of this rollout could significantly impact Tesla’s stock.
Price Action: According to Benzinga Pro, Tesla shares closed at 179.99 on Wednesday. However, the company’s Q1 2024 earnings fell short of estimates, with an EPS of 0.450 against an estimated EPS of 0.510.
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