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Elon Musk's Tesla Skids on Otherwise Strong Day for Stocks

Electric vehicle manufacturer misses on earnings, shares fall in after-hours trading

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James Li
Jan 31, 2019
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On Wednesday, a day where the markets soared on strong earnings from Boeing Co. (

BA, Financial) and Warren Buffett (Trades, Portfolio)’s top holding, Apple Inc. (AAPL, Financial), Elon Musk’s Tesla Inc. (TSLA, Financial) traded lower after the closing bell on the heels of fourth-quarter results that missed analyst estimates.

The Palo Alto, California-based company reported adjusted earnings of $1.93 per share, approximately 30 cents lower than the consensus estimate of $2.20 per share according to Refinitiv.

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CEO warned about potential for disappointing earnings earlier in the month

CEO Elon Musk said in a Jan. 18 letter that preliminary, unaudited results indicated a fourth-quarter profit that is positive yet less than that of third-quarter 2018. The company reported net income of $210 million, approximately $44 million less than the net income from the September quarter.

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Musk said in the earnings report that operating income remained stable despite a sequential decline in revenue, driven by several factors, including the price reduction of the Model S and X in China and the higher import duties on automotive components in China. During the question-and-answer section of the call, Musk anticipated demand between 700,000 and 800,000 vehicles per year; additionally, even during a recession, demand for vehicles is expected to stay above 500,000 vehicles per year.

Management reassures company can still pay March debt using cash

Musk said on the call the company is able to settle in cash the convertible bond that matures in March 2019: even though the company paid $230 million in debt during the fourth quarter, Tesla’s cash position increased $1.45 billion during the second half, including $700 million during the fourth quarter.

Stock falls in aftermarket trading while other big names rise

Unlike shares of several other companies, including Facebook Inc. (

FB, Financial), Boeing and Apple, which all increased on strong earnings, shares of Tesla tumbled approximately 2% immediately after the earnings release, yet rebounded to approximately 0.38% lower than its closing price of $308.77. Gurus with large holdings in Tesla include Spiros Segalas (Trades, Portfolio), Ron Baron (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).

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The Dow Jones Industrial Average eclipsed 25,000 at market close, up approximately 434.90 points from the previous close of 24,579.96. Federal Reserve Chairman Jerome Powell’s comments about how the central bank will “stay patient” with interest rate hikes going forward propelled U.S. markets to their intraday highs.

Disclosure: No positions.

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