KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Tesla shares tumbled 12% on Wednesday, wiping out nearly US$100 billion in stock market value. This drop followed CEO Elon Musk's discussion of futuristic projects like humanoid robots and driverless taxis, which failed to allay investor concerns about the electric car maker's shrinking profit margins.
Key Points for Investors:
Stock Decline:
- Biggest Drop Since 2020: Tesla's stock fell 12%, marking the largest one-day percentage drop since 2020. This reduced Tesla's market capitalization to just under US$700 billion, down from over US$1 trillion in 2021.
Profit Margin Concerns:
- Lowest in Five Years: Tesla posted its lowest quarterly profit margin in five years, with earnings per share missing estimates for the fourth consecutive quarter.
- Sales Challenges: EV deliveries have fallen for two straight quarters, and Tesla has not introduced a lower-cost model that many expected, leading buyers to turn to rival EV makers like China's BYD.
Market Reactions:
- Investor Skepticism: Musk's enthusiasm for future products such as robotaxis and humanoid robots, which are not yet on the market, did little to reassure investors. TD Cowen's Jeff Osborne noted that much of Musk's excitement was for non-existent products.
- AI Investment Doubts: UBS analyst Joseph Spak reiterated a 'sell' rating on Tesla, expressing skepticism about the near-term payoff from Tesla's AI initiatives.
Competitive Pressures:
- Price Cuts and Incentives: Tesla has been forced to cut prices and boost incentives to drive sales of its ageing vehicle lineup. Musk acknowledged that rivals have substantially discounted their EVs, making competition tougher.
- Automotive Gross Margins: The company's price cuts and incentives pushed automotive gross margins, excluding regulatory credits, down to 14.6% in the second quarter.
Future Products and AI Focus:
- Robotaxis and Robots: Musk mentioned that Tesla's Optimus humanoid robot had begun performing tasks autonomously and expressed confidence in self-driving Tesla vehicles without human supervision by next year. However, this follows previous unmet promises, such as the 2019 claim that Tesla would operate a network of robotaxis by 2020.
- AI Startup Investment: Musk launched a poll on X (formerly Twitter) about whether Tesla should invest US$5 billion in his AI startup xAI.
Analyst Ratings:
- Mixed Reactions: One analyst cut their rating on Tesla stock, while there were three price target increases and two decreases. The average rating remains 'hold' with a median price target of US$212.50.
Conclusion:
Tesla's recent financial results and the subsequent drop in its stock price underscore the challenges the company faces in maintaining investor confidence amid shrinking profit margins and increased competition. While Musk continues to hype future products and AI investments, the market remains cautious about the company's near-term prospects and ability to deliver on its ambitious promises. Investors should closely monitor Tesla's upcoming product launches and financial performance to assess the company's long-term viability in the rapidly evolving EV and AI sectors.
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