Tesla Stock Down On Growth Worries
Investors are worried that the electric car maker may miss its growth targets due to inflation and logistical challenges.
Shares of Tesla Inc sank 9 percent in early trading as Wall Street analysts worry that the electric carmakers growth momentum may have hit a speed bump due to rapid inflation and logistical challenges.
At least five brokerages on Thursday cut their price target on the stock, citing softer car deliveries in 2022. Wedbush Securities made the biggest cut of $60 to bring its target to $300.
The bullish narrative is clearly hitting a rough patch as Tesla must now prove again to the Street that the robust growth story is running into a myriad of logistics issues as opposed to demand softening, Wedbush analyst Daniel Ives said.
Tesla stock, which is down 37 percent so far this year, fell to a 16-month low of $202.15 in early trading on Thursday and was set for its worst day since June. By midmorning the stock was up at $209.43, still 5.6 percent below Wednesdays closing price of $222.04.
In its quarterly earnings report on Wednesday, the company pointed to challenges it was facing on the logistics front and said it might miss its target of 50 percent delivery growth this year.
Tesla Chief Executive Officer Elon Musk said on a post-earnings call that demand is little harder than it would otherwise be but the company is confident of a record fourth quarter.
I wouldnt say were recession-proof, but its certainly recession-resilient, Musk said.
Everything You Need To Know About Tesla
Tesla was founded in 2003 by Martin Eberhard and Marc Tarpenning, two engineers who had the vision to revolutionise the auto industry by creating fully-functional, electric-powered vehicles.
The company was not, contrary to popular belief, founded by Musk. However, Musk was instrumental in Teslas success as he invested a sizeable amount of money in the company and helped it raise funds from venture capitalists and angel investors.
The first vehicle Tesla launched was the Roadster in 2008. It then introduced new models, including the Model S, Model X, Model Y, and Model 3. The company is also working to launch a commercial truck called the Tesla Semi, a passenger pick-up truck called the Cybertruck and a new Roadster model.
Tesla is headquartered in Austin, Texas. The company has manufacturing facilities in the US , China and Germany.
During the first nine months of 2022, Tesla produced total revenues of $57.1bn, $50.2bn of which came from the sale of its vehicles. During this same period, Tesla produced a total of 929,910 vehicles and delivered 908,573 units.
Understanding the companys history and current situation is a good first step in the process of drafting a plausible Tesla long-term forecast.
Is Musk Biting Off More Than He Can Chew
It can be argued that no CEO has taken on more responsibility than Elon Musk. In addition to running Tesla, Musk is also founder and chief executive of SpaceX, which has a stated mission of colonizing Mars. SpaceX also owns and operates the Starlink satellite internet network. Musk is also founder and CEO of tunnel maker The Boring Co. Further, Musk runs Neuralink, which seeks to tie human brains to computers.
With all that going on, Musk watchers say he may have overextended himself with his purchase of Twitter.
Musk has spent a large amount of his time focused on Twitter, raising concerns among analysts. In addition to laying off more than half its staff, Musk is dismantling content moderation on the social media site, which has caused a growing number of consumers to turn sour on Tesla brand. This has taken a bite out of Tesla stock.
Morgan Stanley analyst Adam Jonas weighed in on the matter in a note to clients. He said Musk’s spiteful comments have inflated a negative sentiment about Tesla and could drive some degree of damage to the electric-vehicle maker’s fundamentals.
“Our investor survey reinforces our views that Elon Musk’s recent involvement with Twitter has contributed to negative sentiment momentum in Tesla shares and could drive some degree of adverse downside skew to Tesla fundamentals,” Jonas said in a note to clients. Still, he maintained his buy rating on Tesla stock.
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Is Tesla A Good Long
Tesla was one of the first companies to manufacture a top-quality and fully-functional electric-powered vehicle. The company remains the leader of the EV market in the US in units sold and continues to move forward in the development of new models and markets.
However, whether Tesla is the right stock for you depends on your trading objectives. Its important to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. You should never trade more than you can afford to lose.
The History Of Teslas Stock Price By Markets Insider
Tesla launched its IPO on June 29, 2010. Trading on the NASDAQ, Tesla offered 13.3 million shares at a price of $17 per share. It raised a total of just over $226 million.
Teslas stock price was essentially flat for several years after the 2010 IPO. There wasnt a lot going on. In 2008, the carmaker had endured a near-death experience, and in the lead-up to the IPO and afterwards, it was selling only one car, the original Roadster. The business plan at this point was for CEO Elon Musk and his team to keep the lights on long enough in order to roll out Tesla’s first built-from-scratch car, the Model S sedan. Which eventually happened in 2012.
In 2013 Motor Trend named the Model S its Car of the Year. It was at this point, Teslas stock price took off. If you bought Tesla stock right after the IPO and held on, you’d be looking at an 1,000%-plus return today.
Since the sudden growth in 2013 Tesla’s stock price history has been one of extreme volatility. Although a stable stock price wasn’t expected or widely predicted. Investor confidence would soar, then collapse, with sentiment turning on every news event, product announcement or delay, quarterly earnings report, and market-moving tweet by Elon Musk
Tesla has had a highly volatile stock price that has at times baffled investors. There was only one period of smooth price growth, and it gave way to a reliable pattern of volatility that preceded a massive drop.
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Tesla Is Intertwined With The Global Economy
With all the qualitative and quantitative arguments in mind, Tesla still generates the vast majority of its revenue from the traditional automotive sector. In Q3/2022 the company had 87 % of its revenue originating from sales, regulatory credits, and leasing. A mere $ 2,762 B originated from alternative revenue streams, such as Energy generation, energy storage, and other services. Some of the additional software upgrades for the Tesla models are included in the automotive sales, but they make up only a minor portion of the revenues.
While the revenue growth and the trajectory of the profitability cannot be compared to traditional car manufacturers, the dependency on demand for luxury cars remains the same. The automobile industry depends heavily on the balance sheet of the average customer. Generally, consumers will always spend first on consumer staples. If the average balance sheet of consumers is healthy enough, they will start spending on consumer discretionaries. Usually, the balance sheet is healthy if assets appreciate and the cost of credit lessens, i.e., yields decrease. And here’s the problem:
Is Elon Musk Becoming A Liability For The Company
Back in July, The Telegraph titled one of their articles Elon Musk is now a liability for Tesla. The editorial analyzes how Musks childish memes,Bitcoin purge, social media fights, and the Twitter saga are impacting Tesla. To be fair, this is hardly the only time when analysts, industry insiders, and investors expressed concern about Musk’s conduct. And while Musks unconventional tactics and authentic personality may have been groundbreaking in the past, the public is now growing tired of his arguments and juvenile outbursts. Lets not forget that other superstar CEOs that showed great promise have embattled their companies in scandals and ended up tarnishing their reputation and the one of their company. Even worse, they destroyed shareholder confidence and ruined their companies.
Bloomberg Law highlights that a Tesla Inc. investor filed a lawsuit against Musk and the Tesla board in 2021, alleging that Musk has exposed the company to billions in potential liability and market losses by continuing to post erratic tweets, despite a 2018 settlement with regulators mandating pre-clearance of his social media activity.
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Where Is Tesla Stock Heading
If we look at Tesla’s price since April of 2019, less than three years ago, we can see it has rocketed from $50 to over $1,200 in November of 2021 an increase of over 2,400%. Based upon that point alone, extreme caution is advised.
The question remains, has Tesla hit its goals from three years ago and can it continue to outperform competitors in the EV market going forward? It not only has to compete with more rivals it has to improve its profitability at the same time. This may be a bigger challenge than excelling in a new market that it dominated up until recently.
In Europe, it is already being outsold by Volkswagen in the EV market as shown in the graph below.
Schmidt Automotive
Based upon the above, I would say Tesla’s price is probably in the doldrums until it can prove once again it is the insurmountable leader in the EV market and that will not be as easy to do as it was in the past.
The Balance Sheet Of The Average Potential Customer Of Tesla Got Materially Worse
Letâs start with America, where most Tesla cars get sold: During 2022, the 60/40 portfolio got hit hard because the inverse correlation of bonds and stocks started to reverse because of inflation. The housing market hasn’t sold off at similar levels in 2022. But as long as mortgage rates stay this elevated, the optimistic case for 2023 is an illiquid market with sideways price action because the average homeowner is reluctant to sell at a lower price, and buyers canât afford today’s rates coupled with yesterdayâs prices. Either rates or prices have to go down . Additionally, thereâs less money left after buying all the consumer staples needed in everyday life because of high consumer price inflation. However, the rising US Dollar cushions the financial impact on American consumers partially.
The luxury car demand in Europe is likely to get eroded. Europeans face not only the same pain in terms of asset prices. But also much worse consumer price inflation due to the Energy and Food situation. The decline of the Euro in recent months adds additional fuel to the fire. Europeans donât enjoy the privilege of earning their wages in the global reserve currency.
I think it’s almost guaranteed that the revenue of Tesla cannot grow at the previous pace. I believe the market is still way too optimistic about the future, given the rich valuation multiples of Tesla.
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Tesla Stock Declines As Traders Sell Shares Of Richly Valued Companies
Shares of Tesla found themselves under strong pressure amid strong sell-off in equity markets. The stock has already bounced back from the $850 level to the $900 level, but it remains well below the previous close near the $944 level.
Other electric vehicle stocks like Rivian and Nio have also moved lower today. Both stocks are down by about 10% today.
The reason for this sell-off is the continuation of the move out of high-PE stocks on fears over rising rates. S& P 500 is down by more than 10% from all-time high levels, while the tech-heavy Nasdaq has already lost more than 15% of its value.
Checkup On Tesla Stock
According to the IBD Stock Checkup tool, Tesla has a weak IBD Composite Rating of 45 out of 99. When choosing growth stocks for the biggest potential gains, based on the CAN SLIM investment paradigm, focus on those with a Composite Rating of 90 or higher.
The stock also has a paltry Relative Strength Rating of 13 out of 99.
In the stock market, timing is critical. So when you’re looking for stocks to buy or sell, it’s important to do the fundamental and technical analysis that identifies lower-risk entry points that also offer solid potential rewards.
If you’re new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines. IBD offers a broad range of growth-stock lists, such as Leaderboard and SwingTrader.
If you’re interested in buying large-cap stocks, in these articles you’ll find technical analysis of leading large caps such as Tesla stock to see if they are in or near a proper buy zone.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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Why Does Elon Musk Keep Selling Tesla Stock
CEO Elon Musk sold billions of dollars of TSLA stock this week
- Tesla stock has been slumping lately, and the shares are down another 2.5% today.
- A prominent analyst warned that Tesla CEO Elon Musk could damage the automakers brand.
- Musk unloaded roughly $3.6 billion of TSLA stock this week.
After falling 10% over the last week and 16% in the last month, Teslas stock declined another 2.5% in premarket trading today. However, early market trading is looking favorable for TSLA stock as it is up about 2% as of this writing.
A number of high-profile individuals have been urging Tesla CEO Elon Musk to spend less time and effort on . In late October, after a tumultuous acquisition process, Musk acquired Twitter and became the social networks CEO.
The drop in TSLA stock today comes in the wake of news that Musk sold about $3.6 billion of TSLA stock this week.
A Closer Look At Teslas Share Price History
Tesla accumulated gains of 8,535.4% in the past 10 years compared to 348.9% and 187.6% returns produced by the Nasdaq 100 and the S& P 500 index, respectively, during that same period.
This means that the companys has grown at a compounded annual growth rate of 56.8% an impressive return that hasnt necessarily come without hiccups along the way.
The chart above shows that in six months within the past 10 years, TSLA has experienced monthly drawdowns of over 20%. This shows how volatile the stock has been and what it took from investors who adopted a buy-and-hold approach to stay the course to see the value of their holdings increase by the percentages described above.
Tesla hit all-time highs in November 2021 at $414.50 a share, but changes in the macroeconomic backdrop led to a significant decline in its stock value after that as investors adopted a risk-off attitude due to the US Federal Reserves increasingly hawkish actions.
Investors must be aware that past results are not a guarantee of future performance which means that they should not base their Tesla stock predictions on what its price has done in the past.
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Down 50% This Year Is Tesla Stock A Buy
INDIA – 2022/12/12: In this photo illustration, the logo of Tesla is seen displayed on a mobile … phone screen.
SOPA Images/LightRocket via Getty Images
Tesla stock has seen considerable selling pressure losing about 50% of its value over the year. While growth stocks in general have been hit by high inflation and rising interest rates, Tesla faces a couple of other challenges. Firstly, there are real concerns that demand could be slowing down, particularly in China, which has been a big source of growth for Tesla. The company cut prices of its Model 3 and Model Y cars by as much as 9% in China in October, and Bloomberg recently reported that Tesla has planned to scale back production of the Model Y by 20% at its Shanghai factory. Separately, Tesla continues to be weighed down by CEO Elon Musks recent acquisition of the social media app Twitter. Although Mr. Musk purchased the social media company in his personal capacity, he has been offloading Tesla stock to fund the purchase and free up liquidity to manage the loss-making social media company, which has a massive debt load. This has created an overhang over the stock. The Twitter acquisition might also be seen as an unwanted distraction for Mr. Musk, forcing him to take time away from his role at Tesla.
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The Twitter Takeover Is Pushing Tsla Stock Down
As TSLA stock has plunged downward, more and more experts have expressed concern for the electric vehicle company. Per a Barrons report:
is far from profitable, and Musk loaded it up with debt to make the acquisition. Finding a way to cut costs while generating new revenue from the largest tech leveraged buyout ever is a challenge that will test his problem-solving skills and pull his attention away from Tesla.
Its quite reasonable for investors to be concerned about Tesla right now. For one, Musk has been the clear face of Tesla since even before the company made its trading debut. Now that he is clearly focused elsewhere, some investors may be inclined to jump ship before TSLA stock falls further. After all, its hard to feel confident in a company as its founder and CEO makes a mess of a different venture. Today has even brought reports that some of the Twitter layoffs were premature the company is now asking some ex-employees to return.
On top of that news, Musk is also preparing to defend his $56 billion pay package from Tesla against claims that the package has unjustly benefited him. The trial will begin on Nov. 14.
The acquisition of Twitter was largely financed with TSLA stock. If the CEO loses this most recent case, it will likely create more turbulence for both companies.
None of this looks good for TSLA. The company is facing an uncertain future. And Wall Street hates uncertainty.
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