In a cloak-and-dagger operation, Tesla boss Elon Musk visited the Chinese head of government Li Qiang last weekend. The secret meeting was a great success: after Beijing had blocked the company's software for automated driving for the past four years, the local automobile association CAAM has now released it for the Models 3 and Y. This is an important point for Tesla, as it means that the competitiveness of US cars is increasing again and the recently sluggish sales in China could regain momentum.
The successful trip to the Far East has lifted the dark clouds over the e-car manufacturer. Growth concerns, especially in China, have recently been a major problem for Tesla. Increasing competition combined with generally weakening demand caused global deliveries to shrink by 8.5 percent in the first quarter compared to the same quarter of the previous year. Compared to the final quarter of 2024, there was even a slump of a fifth. But it's not just sales figures that are currently plummeting; the price war, partly instigated by Tesla itself - the company cut prices on the North American market just a few days ago - is also putting the brakes on earnings. While the Group still reported an operating margin of 16.8 percent in 2022, last year it was only in the single-digit range at 9.2 percent.
The start to the new financial year was also bumpy. Sales fell from USD 23.3 billion to USD 21.3 billion, whereas analysts had forecast an average of USD 22.15 billion. At 45 cents, earnings per share were also below market expectations of 51 cents. However, Tesla's gross margin was not quite as bad as forecast. Although this fell from 19 to 17.4 percent, analysts had only forecast 15.2 percent. CEO and founder Musk was not particularly confident about the further course of business this year. Without giving exact figures, the 52-year-old expects a noticeable decline in deliveries.
The billionaire is in a much better mood when it comes to new projects. On the one hand, the long-awaited robotaxi "Cybercab" will finally be presented to the world at the beginning of August, and on the other, Tesla is accelerating the market launch of new models. This applies in particular to the more affordable small cars, which go by the unofficial name "Model 2" in the industry. Previously expected to be launched in the second half of 2025, sales are now set to start at the end of this year or early 2025. With these announcements, Musk suddenly wiped away worries of a years-long growth slump and gave the share price a dynamic turnaround.
This was urgently needed, as the tech company's share price dipped to a low of USD 138 this year, losing 44% of its value at its peak. The reporting on the first quarter, in particular the hope of a reset of the growth story, as well as the promising visit to China have now reversed the trend. The share price has now recovered around 40 percent from its low and reduced the loss since New Year's Eve to 21 percent.
While market participants have recently been relieved to buy the share, analysts have relatively mixed views on the future outlook. Out of 52 research reports, 41% result in a buy recommendation and just as many end with a hold rating. The remaining 19 percent recommend a sell. The 12-month target price is USD 177.50, which would correspond to a decline of 8.5 percent.
For the two new soft callable barrier reverse convertibles, such a price loss would have no impact. With these products, high returns can be achieved even with a sideways movement. The CHF-denominated single BRC on Tesla offers an attractive interest rate of 12.00% p.a. with a maximum term of 15 months. On the downside, the product leaves plenty of room for the underlying. The barrier is fixed at 49 percent of the starting value and thus below the low for the year. The identical Barrier Reverse Convertible in USD even promises a coupon payment of 16% p.a. Both BRCs have a soft callable function, which becomes active for the first time after 6 months and can lead to early redemption.
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