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.
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.
Tesla’s Blockbuster Q1 Earnings Show
Tesla reported first-quarter 2022 earnings of $3.22 a share, growing significantly from the year-ago figure of 93 cents and surpassing the Zacks Consensus Estimate of $2.15. This marked the fifth straight earnings beat for the company.
Higher-than-expected deliveries and automotive gross profit resulted in this outperformance. Total first-quarter 2022 deliveries of 310,048 units topped the Zacks Consensus Estimate of 298,495. Automotive gross profit came in at $5,539 million, which outpaced the consensus mark of $4,113 million. Also, revenues from automotive regulatory credits totaled $679 million, breezing past the consensus mark of $301 million and rising 31% on a year-over-year basis.
Total revenues came in at $18,756 million, beating the consensus mark of $17,276 million. The top line also witnessed year-over-year growth of 80.5%. Importantly, the EV giant reported an automotive gross margin of 32.9% and overall gross margin of 29.1% for the quarter. Further, operating margin came in at 19.2%.
Is Tsla Stock A Buy Sell Or Hold
Tesla has been the leader in the EV market virtually from the beginning of its existence as a public company back in 2012. Its charismatic leader Elon Musk is one of the best known entrepreneurs of all time ranking up there with other auto luminaries such as Henry Ford and John DeLorean.
But from a price of $6 a share in 2012 to over $1,200 a share in 2022, an investor has to consider the possibility that the biggest part of the price run is over. Although there could and probably will be substantial price appreciation going forward, the likelihood that will even remotely resemble what has happened in the past is extremely unlikely, and as such expectations should be tempered.
This is not to imply that Tesla is now a plodder, quite the opposite, but one should stop looking at the rocket-ship charts like I have shown above and expect something like that to continue in Tesla’s future.
Other auto stocks may outperform Tesla into 2025, including GM and Ford, mostly because they are starting from a much lower price to value standpoint than Tesla. They only need to perform up to expectations to have a substantial price increase into 2025. Tesla, on the other hand, must outperform immensely over that same period to overcome its current exaggerated PE ratio and market value proposition. Not impossible, but not easy either.
Tesla remains a Hold
If you found this article to be of value, please scroll up and click the “Follow” button next to my name.
This article was written by
Recommended Reading: Are Electric Cars Reliable In Cold Weather
Carmax Shares Drop After Second
CarMax shares tumbled 15.5% in premarket trading Thursday after the used car dealer reported declining sales volume that came in below analyst expectations.
Sales were down 2.9% for the three-month period ending August 31 compared to the same timeframe a year prior. Earnings per share dropped to $0.79, a 54.1% decrease from $1.72 a year ago. Analysts surveyed by Refinitiv were expecting around $1.39 in earnings per share.
CarMax purchased about 8.1% fewer vehicles from consumers and dealers. But net revenue growth was 2% higher than it was a year ago, as the company pointed to increasing profit per sold vehicle despite market-wide depreciation.
Teslas Stock Tumbles Amid Sales Worries And Market Volatility
Investors appear to be reconsidering the high share price as other automakers offer more electric vehicles.
Send any friend a story
As a subscriber, you have 10 gift articles to give each month. Anyone can read what you share.
Give this articleGive this articleGive this article
When the stock of Tesla, the electric carmaker, was added to one of the worlds most important stock indexes in January, some analysts said the companys shares might no longer jump up and down erratically and could behave more like those of blue-chip companies.
Investors had other ideas.
After months of bidding up Tesla stock, helping it join the S& P 500 index, they have been selling furiously in recent weeks. Over $270 billion has been wiped off Teslas stock market value since its share price peaked in January.
The price fell more than 10 percent Friday morning before recovering most of the loss and closing the day down 3.8 percent to $597. The steady losses since a few weeks ago, when shares briefly traded at $900, have wiped out about a third of Teslas market value amid concerns about flagging sales and competition from other automakers that are finally selling electric vehicles many people want to buy.
Many investors have also pulled back from riskier stocks and investments in anticipation of rising interest rates.
Read Also: Electric Car Charging Stations Costs
What It Means For Tsla Stock
The bottom line on Tesla stock is clear: it will rebound in the near future, particularly as the proposed stock split draws near. Shares have been forced down by temporary market forces, and they wont stay down for long. Investors should heed Navelliers advice and take the opportunity to buy TSLA stock on the dip before they do.
Despite questions about Musk, Tesla has all the markings of a business that can and will keep succeeding.
On the date of publication, Samuel OBrient did not hold any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Samuel OBrient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle stocks, green energy and NFTs. OBrient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.
Article printed from InvestorPlace Media, https://investorplace.com/2022/04/why-is-tesla-tsla-stock-plunging-today/.
©2022 InvestorPlace Media, LLC
Read More On Electric Vehicles
- Chinas Thriving E.V. Market: More electric cars will be sold in the country this year than in the rest of the world combined, as its domestic market accelerates ahead of the global competition.
- Setting an Example: A network of fast charging stations in Quebec could serve as a template for how to make road trips easier for drivers of electric cars.
- A Crucial Mine: A thousand feet below wetlands in northern Minnesota are ancient deposits of nickel, a sought-after mineral seen as key to the future of the U.S. electric car industry.
- Banning Gasoline Cars: California is leading the way in the push to electrify the nations car fleet with a plan to ban sales of new internal-combustion vehicles by 2035, but the rule will face several challenges.
The China Passenger Car Association said Tesla sold 15,484 locally made cars in January. That was higher than a year earlier but lower than Decembers total of 23,804. Teslas sales in China often fluctuate when the company exports batches of cars made at a Shanghai plant to Australia, Europe and elsewhere.
Tesla has really benefited from that halo of It doesnt really matter how many vehicles we sell this year or how much cash we burn, said David Whiston, a Morningstar analyst. Its all been Where are we going to be five or 10 years from now? But lately theres been a bit more turbulence.
Don’t Miss: Tesla Model Y 22 Inch Wheels
When Teslas Stock Drops What Happens To The Rest Of The Market
Tesla is a component in both the S& P 500 and the Nasdaq composite index. In addition to being barometers of how stocks in the United States are performing, both indexes are mirrored by numerous mutual funds that are invested in widely.
The S& P 500, considered the benchmark U.S. index, weights companies according to their market value. Tesla, which is worth about $900 billion, is one of the most influential stocks in the index.
For every dollar that Teslas stock dropped on Tuesday, the S& P 500 lost 0.099 points, according to Howard Silverblatt, a senior index analyst at S& P Dow Jones Indices. That means the drop in Teslas stock accounted for nearly a tenth of the S& P 500s fall on Tuesday.
So it did have a very large impact, Mr. Silverblatt said, but not the highest. Apple, with nearly three times the valuation of Tesla, has far more impact. Its stocks drop of 3.7 percent on Tuesday contributed more to the overall indexs decline.
Whats Happening With Tsla Stock
Its important to note that it isnt just the Nasdaq that has spent this afternoon in decline. Both the Dow Jones Industrial Average and the broader S& P 500 have been trending downward all afternoon as the weeks market sell-off has resumed. CNBC reports that it began after Apple , a stock formerly known for outperforming in bear markets, had received an analyst downgrade. Since then, other high-growth tech names have faced an uphill battle, and TSLA stock is no exception. Another of the days top losers is Tesla competitor Rivian which has fallen more than 8%.
Despite the general market volatility, Tesla has also received some bad news from Wall Street. Piper Sander analyst Alexander Potter recently downgraded TSLA stock, citing concerns about Tesla demand in international markets. Recently, there has been an up-tick in client questions regarding Tesla s positioning in China, he stated in a note to investors. Barrons reported that while Potter doesnt foresee any steep declines in demand statistics, he feels that consensus delivery estimates for the third quarter are probably too high.
Its true that while new Tesla registrations have been increasing in China, concerns about demand have been rising as well. As Investors Business Daily also reported:
Also Check: How Much Is Tesla Charging
Is Tesla Stock A Buy
Tesla is not a buy at this time. It has hit resistance at the 200-day line, so the short-term outlook is poor. After a strong July, this pullback is not surprising, and the stock is well below prior highs. But Tesla stock is holding above its 50-day moving average, which is a positive sign.
Amid the current volatility, it’s an important time to read and follow IBD’s The Big Picture column.
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.
You’ll also find alerts to warning signs and sell signals that show when to take your profits or cut short any losses. You’ll also discover if the current stock market trend is conducive to buying stocks, or if it’s an environment where you want to take defensive action and sell.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
YOU MAY ALSO LIKE:
Tesla Chinese Rival Launches New Suv
Tesla , the industry leader in electric vehicle production and deliveries, is busy producing and selling its Model S and Model 3 sedans, as well as its Model Y and Model X SUVs. Other Chinese rivals of Tesla are not producing or delivering anything close to the industry leader’s numbers. Shanghai-based Nio delivered 227,949 EVs in the first seven months of 2022, while Guangzhou, China, EV maker XPeng delivered 90,085 in the first eight months of the year, which was a 96% increase year-over-year.
Don’t Miss: The New Toyota Electric Car
Sales Should Be Back On Track Next Quarter
Tesla should see significant gains in the latest quarter, with August sales estimated to be over 100 percent YoY, and with China sales expected to be around 77,000 vehicles in August, things seem to be back on track after a small hiccup in the previous quarter. Meanwhile, Tesla is expected to have doubled its market share in the US to 4%, with sales doubling for the month as well YoY. Tesla, in general, has seen strong uptake in many countries, including the likes of Australia, although results in Europe have been mixed. Should the next quarter’s results come in strong again, Tesla could see its stock rise once again, going against the general trend of tech stocks.
Valuations have broadly retreated in the tech sector, with many companies down over 50%, but Tesla remains one of the few companies that have triple-digit valuations still with the current price-to-earnings still over 100, many remain skeptical still. But, considering that Teslas growth continues to remain very high, and there seems to be little let up in terms of momentum, valuations may not be that expensive. Especially considering margins have also remained sustainable until now, the next couple of quarters will set the tone for where the price heads.
Tesla is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
Why Is Tesla Stock Down Today
Is another recall a reason to sell TSLA stock?
- Reports that a recall affecting approximately 1.1 million Tesla owners has some investors spooked.
- This announcement follows yesterday’s hawkish rate hike decision by the Federal Reserve.
- Accordingly, it appears portfolio positioning is growing increasingly defensive among many in the market today.
Most stocks are taking another leg lower today, following yesterdays Federal Reserve interest rate hike. This was the Feds third-consecutive 75 basis point move. That said, Tesla is falling harder than the overall market today. At the time of writing, TSLA stock has sunk nearly 4% as investors price in company-specific news.
Today, reports are circulating that Tesla has recalled approximately 1.1 million vehicles due to a manufacturing issue. An automatic reversing system for the windows in Tesla vehicles may not react correctly after detecting an obstruction. Accordingly, with the potential for passengers to have their fingers pinched by their cars windows, the National Highway Traffic Safety Administration issued a report saying, these vehicles fail to comply with the requirements of Federal Motor Vehicle Safety Standard number 118, Power-Operated Window Systems.’
This news, along with increasingly bearish sentiment in the markets, appears to have investors taking a more defensive posture today. Lets dive into what to make of this news.
Don’t Miss: How Are Electric Cars Made
Stock Futures Extend Losses After Jobless Claims Report
Stock futures extended losses after jobless claims data hit a five-month low despite the Federal Reserve’s efforts to slow the labor market.
Futures tied to the Dow Jones Industrial Average dropped 324 points, or 1.09%. S& P 500 and Nasdaq 100 futures declined 1.32% and 1.63%, respectively.
Jobless claims for the week ended Sept. 24 totaled 193,000, according to the Labor Department on Thursday. The figure was lower than the prior week’s adjusted 209,000 and below the 215,000 Dow Jones estimate.
It’s the lowest level in claims since April and the first time claims fell below 200,000 since early May.
Sarah Min, Jeff Cox
Ark Innovation Etf Dips More Than 5% As Sell
Cathie Wood’s Ark Innovation ETF slumped more than 5% on Thursday morning amid a broad market sell-off.
Pacific Biosciences, down more than 7% and Coinbase, off by roughly 9%, are among the names dragging the ETF. Tech companies, like the constituents in ARKK, are especially sensitive to rising interest rates.
ARKK is off by nearly 10% for the month, and it’s down 60% in 2022.
Darla Mercado, Gina Francolla
Also Check: Electric Car Charging Stations Arkansas
Why Is Tsla Stock Falling Today
Like other auto manufacturers, Tesla has been hit by a number of recalls over the years. As noted by Tesla bull Fred Lambert in a recent Elektrek article, most of these recalls have been resolved with simple over-the-air software updates. This most recent issue will also be reportedly resolved via a software update as well.
Accordingly, bulls may have a point that the headlines put forward in the media may be misleading. While any sort of potential hazard that could cause injury ought to be taken as a big deal, something that can be solved by a software update, and doesnt require a vehicle to visit the shop, really cant be recalled. Accordingly, this game of semantics is one that continues to polarize the bulls and bears of TSLA stock.
Thus, perhaps broader macro factors such as rising interest rates are what investors should watch more closely with TSLA stock. After all, while Tesla is profitable, this is still a high-growth name trading at an extreme multiple. Should the overall demand for high-priced luxury goods come down, Teslas growth could dwindle considerably. After all, the market for SUVs priced at more than $125,000 is limited and may shrink, if we see the kind of economic slowing the Fed suggests is likely.
On the date of publication, Chris MacDonald did not have any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tesla Stock Moves Lower As Reuters Indicates That The Company Halted Plans To Expand Its Plant In China
Tesla shares opened with a gap down today after Reuters reported that the company had paused plans to expand its Shanghai plant.
According to the report, the reason for this decision is the uncertainty related to U.S. China tensions. While the current U.S. President Joe Biden is not using harsh rhetoric against China like former President Donald Trump, the course of U.S. China relations has not changed.
Other electric vehicle stocks like NIO or Li Auto have also moved lower at the start of todays trading session but managed to attract buyers and moved closer to the positive territory. The continued deterioration of U.S. China relations can hurt both Tesla and Chinese electric vehicle makers.
Read Also: Wawa Tesla Charging Station Cost