Tesla’s profit fell by half. The car company has a negative cash flow after four years

The American car company Tesla announced its economic results for this year’s first quarter after the market closed on Tuesday. And it was no glory. The company’s total revenue fell nine percent year-over-year to $21.3 billion, with Wall Street expecting a number about a billion higher. The company’s net profit fell by more than 50 percent to $1.13 billion.

Tesla’s first-quarter operating margin is 5.5 percent, down significantly from 11.4 percent in the first quarter of last year. After four years, the company has a negative cash flow of $2.53 billion. However, the company’s shares rose by 13 percent in the after-market phase. Musk has announced that Tesla will speed up the introduction of more affordable vehicles to the market.

The American carmaker has already recently published data on deliveries for the first quarter of the year, and investors received a big disappointment. Tesla reported a quarter-on-quarter drop in delivered cars by a fifth to 386,810 cars. Deliveries were also lower year-on-year, marking the first annual decline since the second quarter of 2020.

“Global EV sales continue to be under pressure as many automakers prefer hybrids over EVs,” Tesla said of the results.

“Tesla was one of the pioneers in the electric vehicle industry, and the promise that electric cars will be the future of the automotive industry has sent its valuation sky high. However, as the industry matures and competition grows, Tesla is struggling to maintain its lead. Its Chinese EV rivals offer cheaper products, while its traditional car rivals have higher profit margins,” said analysts at brokerage XTB.

Shares of the electric car manufacturer have recently received several directives and are performing almost the worst in the S&P 500 stock index this year, falling by almost 42 percent. From its peak above $400, the title is almost two-thirds cheaper with a current price of $142.

Tesla has been dealing with a number of issues lately that are making investors nervous. It is mainly about strong competition from China in the form of the BYD brands and now also Xiaomi. But also a slowdown in the growth of demand for electric cars. The company reacted to this by reducing the prices of its vehicles in the main markets, for example in the USA, China and Germany.

However, the move raised concerns on Wall Street about declining margins. Additionally, last week Tesla announced layoffs of more than ten percent of its workforce and recalled thousands of new Cybertrucks due to safety concerns. In a statement on Tuesday, the company announced that it would cut 400 jobs at the gigafactory near Berlin, and that 2,688 employees are expected to be laid off in Austin, USA, where it has its headquarters and main factory.

Experts suggest that, in addition to economic results, potential investors are being put off by Musk’s controversial statements.

However, this group does not include, for example, the well-known American investor Cathie Woodová, whose investment fund Ark Invest has bought Tesla shares several times recently. Last Monday, a total of 122,752 units valued at $17.44 million.

Wood believes that the share price can attack up to the $5,000 mark in the future. It is driven by the belief that in a few years, electric cars and electric trucks will make up 80 percent of all vehicles sold.

However, investor Per Lekander, managing partner of the investment company Clean Energy Transition, sees the future development of shares in a completely different way. He assumes that the stock will fall to the price of $14 per piece. Lekander believes that the stock is overpriced and its current market valuation does not correspond to reality.

Starting in 2020, Lekander is so-called “shorting” Tesla shares, or speculating on their decline. When he talked about these bets in March 2021, the stock was trading around $234. Given the current price, this bet is a success. However, the stock has since looked up to above $400 a piece.