Tesla’s stock fell more than 12% after CEO Elon Musk issued a warning that sales growth would not pick up this year, even in spite of price cuts that have already negatively impacted the company’s margins and heightened investor apprehension about weak demand and competition from China.
Elon Musk stated on Wednesday that growth will be “notably lower” as Tesla concentrates on producing a more affordable, next-generation electric car at its Texas factory in the second half of 2025, which is anticipated to lead to the next wave of deliveries.
However, he added that because the new model would require cutting-edge technologies, scaling up production would be difficult.
On Thursday, Tesla’s stock saw its biggest intraday percentage loss in over a year, wiping out $80 billion in market value. Its monthly market capitalization loss increased to roughly $210 billion as a result.
According to TD Cowen analysts, “the Tesla headlines have essentially gone from bad to worse,” adding that the company’s profit and revenue for the fourth quarter fell short of forecasts.
Rivian Automotive Inc., Lucid Group, and Fisker saw their shares decline by 4.7% to 8.8%, along with those of other EV manufacturers.
The EV industry has been struggling with a decline in demand for more than a year, and Tesla’s price reductions will probably make things worse for startups and automakers like Ford.
“The problem for Tesla is any significant attempt to boost sales from here on will probably need to be achieved at the cost of further falls in operating margin, due to having to compete with BYD in China, as well as increased competition elsewhere,” stated Michael Hewson, chief market analyst for CMC Markets
While seven brokerages increased their ratings, at least nine downgraded the stock. The company’s median price target of $225, which is 23% higher than the share’s closing price of $182.63 on Thursday, is accompanied by an average “hold” rating.
The data and analytics firm Ortex reports that short sellers of Tesla have made $3.45 billion so far this year, making it the most profitable short trade in the United States.
Based on LSEG data, the stock of the company is trading at almost 60 times its projected 12-month earnings. Compared to the other “Magnificent Seven” stocks, which also include Apple, Microsoft, and Nvidia, it is valued at a higher premium.
According to some analysts, if Tesla’s sales growth and margin continue to deteriorate, the valuation may become difficult to defend.
Tesla is beginning to resemble a conventional automaker, according to Bernstein analyst Toni Sacconaghi.
