Tesla had a record breaking quarter, but why didn’t the stock follow?

Tesla Inc, reported its first quarter deliveries on 2 April. 3 days ago. The company delivered over 422,000 cars and produced a record breaking 440,000 cars.

Well if the company did post a record quarter then why did the shares of the automaker tumble by more than 6% on that day? As per some analysts and financial institutions, it was said that the company’s industry leading profit margins were in trouble as following the recent price cuts brought only a small increase in the deliveries for the company.

It is believed by some that this will not be sustainable for the company as if it is only relying on price cuts, then sooner or later, the margins will start to decline and cash flow problems might arise.

But on the other hand, since Tesla has built up such a huge cash reserve and while they plan to invest it by building a new Giga Factory in Mexico, why not use the massive cash reserve to cut down the prices of cars and bring in additional demand, and yes it does come at a cost of lowered profit margins, but overall, it helps to attract more customers from rival companies.

Sadly, the stock didn’t follow and now it has tumbled down to around $185, from monthly highs of $207. The thing is even though it might and still does trouble investors in the short-mid term, given the uncertainties of the global economy, while long term investors might look at this as a perfect long term buying opportunity because after a year or two, when Tesla is delivering Cyber Trucks (hopefully this quarter) and is doubling down on AI and the other projects, the company’s stock will follow it in the long run.

Jeff Bezos famously said, sometimes a company might perform amazing but somehow the stock won’t follow. But in the long run, the market will surely identify the performance and reward the stock as it’s deserved value.

Have a great week ahead!

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