Tesla Inc. investors are grappling with the sharpest decline in the stock’s value in recent memory, as shares of Elon Musk’s electric vehicle empire plummeted by 26% this month, erasing a staggering $205 billion in market capitalization. The stock is poised to close lower for the sixth consecutive week, marking its longest losing streak since 2016, a period predating the launch of Tesla’s first mass-market car, the Model 3.
“There’s a sense of uncertainty looming over Tesla’s stock in the near term,” remarked Adam Sarhan, founder and CEO of 50 Park Investments, highlighting investor bewilderment amid the company’s downward trajectory. “Investors are puzzled. If Tesla is revising its forecast downwards and exhibiting a lack of bullishness for the near future, why should investors remain optimistic?”
The sell-off can be attributed to various factors. Concerns within the auto industry regarding diminishing demand for electric vehicles have emerged, exacerbated by Hertz Global Holding Inc.’s decision to retract plans for expanding its electric vehicle fleet, coupled with Ford Motor Co.’s observation of a tepid market for such vehicles.
Moreover, Tesla’s implementation of multiple price cuts has sparked apprehensions about shrinking profit margins. The release of the fourth-quarter earnings report on Wednesday exacerbated the situation, as the company hinted at a notably slower expansion rate in 2024 without providing detailed insights, leading to a sharp decline in the stock’s value.
In response to the deteriorating outlook, at least two analysts have downgraded Tesla’s stock, while several others have slashed their price targets. The average price target for Tesla has dropped by nearly 8% since Tuesday, now standing at $220.34, with the shares trading at approximately $185.
Even staunch Tesla bull Daniel Ives of Wedbush Securities removed the stock from his “Best Ideas List,” citing the company’s lack of transparency regarding price cuts, outlook, and demand as concerning factors. Although Ives maintains a buy rating on the stock, he has revised his price target downwards.
Looking ahead, Tesla’s reluctance to provide a clear roadmap amidst an anticipated “EV winter” plaguing the entire industry in the coming year suggests that the stock may remain volatile for the foreseeable future.
However, the sharp decline in Tesla’s stock price this month has triggered technical signals indicating oversold conditions, potentially signaling an impending reversal. Matt Maley, chief market strategist at Miller Tabak + Co., highlighted the stock’s plunge into oversold territory, suggesting the possibility of a near-term bounce back despite potential further declines.
In summary, Tesla investors find themselves navigating a period of uncertainty as the company’s stock experiences unprecedented losses, influenced by a combination of internal challenges and external market dynamics within the electric vehicle industry.
