Electric vehicle powerhouse Tesla (TSLA 0.90%) posted another quarter of impressive growth, but investors were more focused on CEO Elon Musk's efforts to temper expectations about what is to come. Shares of Tesla fell 19.7% for the month, according to data provided by S&P Global Market Intelligence, as investors digested the numbers and tried to make sense of this much-debated company.
Tesla's growth came at a steep price during the last quarter
Tesla has established itself as a world leader in the production of electric vehicles, and that trend continued in the third quarter. In mid-October, Tesla announced revenue up 9% year over year and deliveries up 27%.
But gross margin fell to 17.9% from 25.1%, and net income was down 44% to $1.8 billion due to higher costs related to factory upgrades and pricing discounts. CEO Musk warned that further discounting could be required as Tesla deals with competitive pressures and tries to sell into a more skittish economy.
Musk also admitted the much-anticipated Cybertruck has been harder to produce than he had anticipated and said Tesla has its work cut out to reach a production volume that would allow the truck to be cash flow positive at a price consumers can afford.
The CEO warned it could take more than a year for the Cybertruck to contribute meaningfully to Tesla's cash flows.
Is Tesla stock a buy after it struggled in October?
Tesla is facing headwinds, but the company has $26 billion in cash and equivalents on its balance sheet to help it weather whatever the next few quarters will bring. The company also continues to forecast significant growth, reiterating its target to produce 1.8 million vehicles in 2023 compared to 1.37 million vehicles last year.
The company also continues to invest in areas that include energy storage, autonomous driving, and artificial intelligence (AI). Musk said on the post-earnings call he believes AI "has the potential to make Tesla the most valuable company in the world by far."
If Musk and Tesla can continue to execute, there's no telling what the company can become. But given the near-term issues the company currently faces, investors intrigued by the opportunity will likely need to exercise a considerable amount of patience and potentially deal with significant volatility from here.
Investors who believe in the potential should keep their seatbelts fastened and their hands on the wheel as Musk and Tesla navigate the challenges that the current operating environment creates.