Aly Song/Reuters
- Tesla stock fell 8% Thursday after its earnings disappointed Wall Street.
- The EV maker met analysts' first-quarter revenue targets but reported slimmer profit margins.
- Elon Musk has slashed the prices of Tesla's flagship vehicles in a bid to gain market share.
Tesla stock slid Thursday after the electric-vehicle maker revealed its aggressive price cuts eroded its profit margins last quarter.
Shares fell 8% to trade at just under $167 at the opening bell, after Tesla's first-quarter earnings fell short of Wall Street's expectations.
The automaker posted earnings per share of $0.85 and revenue of $23.33 billion, both of which were roughly in line with analysts' estimates, according to Refinitiv.
But its net income plummeted 24% year-on-year to $2.51 billion during the three months ending March 31.
Tesla's margins have shrunk in part because it aggressively cut the price of top-selling cars including the Model 3 and Model Y last quarter, in a bid to boost its market share.
CEO Elon Musk signaled Wednesday that he doesn't expect the EV maker to stop cheapening its flagship vehicles anytime soon.
"This is a good time to increase our lead further, and we'll continue to invest in growth as fast as possible," he said of the price cuts in a call with analysts after the closing bell.
Musk's price war could boost Tesla's long-term market share – but it's unlikely to play well on Wall Street if the cuts eat further into its profits, analysts say.
"Market share or margins, that seems to be the conundrum facing electric vehicle powerhouse Tesla," AJ Bell investment director Russ Mould said Thursday.
"Right now, it looks like the company's competitive position is being prioritized over protecting profitability and only time will tell if that is the right move," he added.
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