Tesla recently announced its profits in the 4th quarter of 2020. And even after having such a great year, the company missed the estimated $0.90 EPS by 10%. This was despite the fact that the revenue of the company was more than estimated. The deliveries surged but the gross margin of the company fell, and this all resulted in Tesla feeling the heat from investors. On 29th Jan, Tesla shares crumble and fall by 5% after the market was disappointed.
Tesla’s share prices fall
Tesla has seen a huge increase in the number of deliveries, but the problem lies in the fact that most of these deliveries are of the Model 3. This is the company’s cheapest vehicle, so even though the deliveries increased, the average selling price fell by 11%. Tesla saw a huge rise in revenue due to its outstanding sales in China and other countries rising to a 202% rise. This all resulted in a huge expectation from the company. And when the Q4 2020 EPS estimates were not met, the shares prices fell.
Should you buy it?
According to market experts, it is still recommended that investors hold Tesla. Presently there are 11 “Buy” ratings, 15 “Hold” and 8 “sell” ratings in the wall street market. I do think that the dip is a great time to buy and take a position, but from any point, this is not investment advice. Even though the company did not meet the EPS estimates, it is still in the positive. At the same time, the company is also making constant progress in the number of deliveries.
Another important thing to note is that Tesla is advancing in different regions. Just a while back, Tesla entered Israel and very soon will enter India too. In fact, they are also planning to set up a manufacturing plant in the country that will reduce prices and boost sales. The shares of Tesla have been through a lot since it went public, but it never failed to bounce back. So, from a year from now, I can see the company’s shares trading much higher than they are now.
If the share prices of Tesla fall further it is probable that Elon Musk might slip back to no 2 of the world’s richest people list. Well, if that happens it will be bad news for all enthusiasts and fans that follow Musk. But I am still positive that the prices will bounce back again. What are your thoughts on the fact that Tesla shares crumble on not meeting the EPS estimates? Do let us know in the comments below. Also, if you found our content informative do like it and share it with your friends.
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