Sun, June 16, 2024

Tesla Stock Demise Has a Long Road to Recovery

Tesla, supply chain, Musk

Tesla stock took a beating in December. The carmaker’s shares dropped on fresh demand worries and a halt at its China plant. The year should be its worst ever.

Tesla Motors suffered a seven-day losing streak through Tuesday’s close, having seen its worst December stock performance. Since September 2018, when the firm was trying to deliver its new Model 3 to consumers, it has had the longest losing run.

Tesla has recently traded back to August 2020 levels. Losses totaled over a third of their value in the last seven days. Wednesday’s stock market performance was better, with shares gaining 3.3%.

Tesla investors are scared by a range of issues. These include Mr. Musk acquiring Twitter Inc. and targeting all his attention in that direction. On the other hand, Tesla was on track to deliver consistent profits and the largest-ever annual profit.

The prospects of a lack of demand amid rising interest rates hit once-triumphant growth stocks across the board. This fueled investor worries. Tesla offered large discounts to entice consumers to take cars before the end of the year. The process intensified in recent days. However, this maneuver is more typical of conventional car companies than Tesla. Surprisingly, Mr. Musk has regularly mocked the marketing ploys used by traditional car firms.

Despite the Selloff, Tesla Outstrips Many of Its Peers

Tesla is the biggest automotive firm by market capitalization. It has valuations that outpace its traditional Detroit, European, and Asian rivals despite utilizing some classic car manufacturing sales tactics. Despite its recent drop, Tesla trades at a price-to-earnings ratio of around 19.4, compared to approximately 16.7 for the S&P 500. By contrast, Toyota Motor Co. recently traded at a ratio of 6.4 to 8.5, indicating that they might not earn as much as projected.

Tesla isn’t the sole car company whose stock has plummeted. Rivian Automotive Inc. and Lucid Group Inc. have lost more than 80% of their value.

Mr. Musk exacerbated demand fears last week by blaming high-interest rates for depressing vehicle sales. He said that Tesla’s planned share buyback, which some investors have been demanding for months, could be influenced by recession worries. Musk predicted in October that a meaningful stock repurchase would occur.

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