Friday, 26 January 2024 Reading time : 2 minutes

Following a disappointing quarterly result, investors are reconsidering their investment in Tesla: the US electric car manufacturer's shares fell by around 12% in trading on Thursday, while the market as a whole was slightly up. The share price of the stock market heavyweight has been sliding since the end of 2023, having almost doubled over the course of the year.

The Austin-based company released its earnings for the last quarter after the closing bell on Wednesday. Not only were the profit and revenue figures slightly weaker than analysts expected. Most notably, Tesla did not announce a sales target for 2024. Instead, the company is forecasting much slower growth in vehicle deliveries. The slowdown follows rapid growth in 2023, when global vehicle sales rose 38% year-on-year. However, several price cuts were necessary to boost deliveries, which in turn reduced profit margins. 

Tesla is likely to continue to focus on cheaper models in the future. CEO Elon Musk said on a call that the development of a low-cost vehicle was well advanced. However, he did not give any details. Tesla is feeling the effects of fierce competition from China, with Chinese manufacturer BYD threatening to overtake the Americans: in the fourth quarter, BYD sold more electric cars globally than Tesla for the first time. 

For investors, the pullback can be an opportunity. With a BRC, a coupon can be generated even if the price is expected to move sideways. 

The low-strike BRC also has the advantage that the strike, which must be reached if the barrier is touched, is below the initial fixing of the underlying. If such a barrier event occurs, the underlying is more likely to be above the strike at maturity. If the final fixing level of an underlying is below the strike following a barrier event, the underlying with the worst performance will be delivered, as with the classic BRC. In this case, the investor receives the underlying at a discount to the initial fixing - in the case of a BRC with an 80% strike, the purchase price of the delivered share would be 80% of the price at the initial fixing. The coupon remains guaranteed and will be paid in any scenario.

10% p.a. Low Strike BRC on Tesla (USD)

• 59% barrier
• 80% strike
• 12 months maturity
• Subscription until 01.02.2024
• Termsheet

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