Tesla’s stock falls by 5% in the wake of its underperformance in the third quarter.

Tesla (NASDAQ:TSLA) reported quarterly results that fell short of Wall Street estimates, with its recent wave of electric vehicle price reductions weighing on margins.

Tesla's shares dropped 5.5% in pre-market trading on Thursday following the earnings release.

Tesla reported an adjusted earnings per share of $0.66 on revenue of $23.35 billion. Analysts surveyed by Investing.com were expecting an EPS of $0.73 on revenue of $24.32 billion.

Gross margins excluding credits, which have been closely watched after recent EV price cuts, slowed to 16.1% in the quarter, down from 18.7% in the second quarter.

Tesla delivered 435,000 EVs in the third quarter, down from 466,140 in the second quarter, due to upgrades in various factories, the company stated. "During the quarter, we stopped several production lines to make upgrades at various factories, which resulted in a sequential decline in production volumes."

The shares gave up earlier after-market gains and fell following cautious remarks from CEO Elon Musk.

"I'm concerned about the high-interest-rate environment that we're in," he said during the conference call.

"If interest rates stay high or go higher, it will be even more difficult for people to buy the car.

Musk went on to add, "I can't emphasize enough the importance of cost... We need to make our products more affordable so that people can buy them."

Musk's comments about the Cybertruck were another key factor in the decline.

"The Cybertruck is going to require a massive amount of work to get to volume production and be cash flow positive at an affordable price point for people.

"I just want to temper expectations for the Cybertruck. It's a great product, but financially, it's going to be about a year or 18 months before it significantly contributes to cash flow," he added.

Wall Street analysts appear increasingly concerned about Tesla's short-term outlook, especially after Musk's comments.

Goldman Sachs (NYSE:GS) analysts, who lowered their price target from $30 to $235 per share, wrote in a note: "We believe the 3Q report will reinforce short and medium-term investor concerns, given company comments that the current macroeconomic backdrop/higher rates may constrain its growth (including how quickly it's ramping factories), and comments that initial Cybertruck ramp could be slow."

Citi analysts said the results were weaker than expected. They also lowered their price target from $271 to $255 per share.

"We expect some pressure on the stock following these results. Tactically, we prefer to stay on the sidelines awaiting a more compelling entry point with visible near-term fundamental catalysts."

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