Tesla’s stock took a major hit on Thursday, plunging 9.75% after the electric vehicle company reported weaker-than-expected profit margins and revenue.[0] The company’s gross margins fell more than anticipated in Q1 due to multiple price cuts, which have continued in April.[1] CEO Elon Musk even stated on the earnings call that he’s willing to see margins fall further to boost production.[1] While most analysts remain positive toward Tesla, David Trainer, CEO of Nashville-based investment research firm New Constructs, thinks the stock has farther to fall.[2] According to Trainer, Tesla’s recent earnings report confirms that it is not invulnerable to competition and may experience reduced profitability in the coming times. He further notes that the company’s current valuation suggests the opposite.[2] In a best-case scenario for cash flow, the shares could potentially be valued as low as $28.[2] As a point of reference, the stock of TSLA experienced a decline of 9.8% today and ended the day at a closing price of $162.99.[2]
In contrast, CSX Corporation’s shares climbed 3.8% after the transportation company’s first-quarter results topped expectations.[3] CSX reported earnings of 48 cents per share and revenue of $3.71 billion, beating analysts’ expectations.[3] This resulted in shares rising by 2.6%. Similarly, Procter & Gamble (PG) rose nearly 4% after reporting better-than-expected results in Q1.[4] The consumer goods giant’s earnings and revenue topped Wall Street’s expectations, and it also boosted its forecast for organic sales growth for fiscal 2023 to 6% from its earlier forecast of 4% to 5%.[4]
In economic news, U.S. initial jobless claims increased by 5,000 to 245,000 in the week ended April 15, above market estimates of 240,000.[5] Meanwhile, the S&P Global’s flash reading on the U.S. Manufacturing Price Index came in hotter than economists surveyed by Bloomberg had expected on Friday.[6] Services PMI hit a 12-month high at 53.7, while Manufacturing PMI hit a six-month high of 50.4.[6] According to Bloomberg consensus data, economists had predicted that the Services PMI would be 51.5, while the Manufacturing PMI would be 49.[6]
Looking at Q1 as a whole, total S&P 500 earnings are now expected to be down 8.8% from the same period last year on 2.1% higher revenues. This would follow the 5.4% decline in the preceding period’s earnings (2022 Q4) on 5.9% higher revenues.[7] According to FactSet’s data projections, the S&P 500’s Q1 earnings are expected to decrease by an average of 6.5% compared to the previous year. It would signify the second consecutive drop in quarterly profits, and the most substantial one observed across the index since Q2 2020.[8]
Gold futures fell 1.3% to $1,993.20 an ounce, while Bitcoin fell 1% to $27,944.[9] The Dow fell 0.[10]
0. “Dow Jones Falls 200 Points After Jobless Claims; Tesla Dives On Earnings” Investor’s Business Daily, 20 Apr. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-fall-ahead-of-jobless-claims-tesla-dives-on-earnings
1. “Dow Jones Futures Fall: Tesla Hikes Model S, X Prices; Cathie Wood Lifts TSLA PT To $2000 | Investor’s Business Daily” Investor’s Business Daily, 21 Apr. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-market-rally-holds-key-level-cathie-wood-new-tesla-price-target/
2. “Stock Market Today: Stocks Struggle After Tesla Earnings, Economic Data” Kiplinger’s Personal Finance, 20 Apr. 2023, https://www.kiplinger.com/investing/stocks/stock-market-today-stocks-struggle-after-tesla-earnings-economic-data
3. “Stocks end Friday’s session little changed, Dow snaps 4-week win streak: Live updates” CNBC, 21 Apr. 2023, https://www.cnbc.com/2023/04/20/stock-market-today-live-updates.html
4. “Stocks Slip on Mixed Corporate Earnings Results and Higher Bond Yields” Barchart, 21 Apr. 2023, https://www.barchart.com/story/news/16197936/stocks-slip-on-mixed-corporate-earnings-results-and-higher-bond-yields
5. “Stock Market News Today: Stocks Dive on Rising Profit Concerns” TipRanks, 20 Apr. 2023, https://www.tipranks.com/news/stock-market-news-today-futures-down-on-mixed-corporate-earnings
6. “Stocks waver amid corporate earnings, strong economic data: Stock market news today” Yahoo Finance, 21 Apr. 2023, https://finance.yahoo.com/news/stocks-waver-amid-corporate-earnings-strong-economic-data-stock-market-news-today-164241316.html
7. “Zacks Earnings Trends Highlights: JPMorgan, Bank of America, Citigroup, US Bancorp and PNC Financial” Yahoo Finance, 20 Apr. 2023, https://finance.yahoo.com/news/zacks-earnings-trends-highlights-jpmorgan-115011826.html
8. “The earnings recession is here. There could be worse to come” CNN, 19 Apr. 2023, https://www.cnn.com/2023/04/19/investing/premarket-stocks-trading/index.html
9. “Stocks Edge Higher as Traders Weigh Earnings, PMI: Markets Wrap” Yahoo Finance, 21 Apr. 2023, https://finance.yahoo.com/news/asia-stocks-set-fall-tech-221552721.html
10. “U.S. stock futures little changed as first full week of earnings season comes to a close” MarketWatch, 21 Apr. 2023, https://www.marketwatch.com/story/u-s-stock-futures-drift-lower-as-first-full-week-of-earnings-season-comes-to-a-close-604078ef