Tesla stock plummeted by over 40% year-to-date, hitting a new low with a 2% loss on Friday, now trading at $147 per share – a significant decrease from its peak of over $400 in November 2021. The recent losses are attributed to negative factors such as missed earnings, a decline in vehicle deliveries, and upcoming financial results that are expected to show a drop in revenues and profits. Despite the stock being the cheapest it has been since January, Tesla’s valuation remains high compared to other companies, with metrics like a high price-to-earnings ratio and poor earnings yield indicating overvaluation.
Analysts are cautious about Tesla’s future outlook, with concerns about the uncertainty of its product roadmap, including its push into autonomous driving and reported abandonment of a lower-cost electric vehicle. This uncertainty means that it may take a while for Tesla to regain its previous strong earnings growth and cash generation. Consensus forecasts do not expect Tesla to reach its record $14 billion profit seen in 2022 until 2026. Wedbush analyst Dan Ives noted that many long-time Tesla believers are giving up on the company, signaling a changing sentiment among investors.
The market’s high valuation of Tesla suggests that investors see potential in Tesla’s long-term prospects, particularly in artificial intelligence and its ambitious robotaxi program. While Tesla has shown remarkable growth in electric vehicle deliveries and capital discipline, the timeline for achieving success in these areas may be longer than investors anticipate. Deutsche Bank analysts project that the robotaxi program could bring in $15 billion in gross profits by the end of the decade, but significant challenges need to be overcome for Tesla to realize this opportunity.
In a symbolic twist, ExxonMobil surpassed Tesla in market capitalization on Friday, marking a shift in perception from the most valuable renewable energy car company to the U.S.’ largest oil company. Despite its recent struggles, Tesla’s stock performance has outpaced the broader market since the beginning of the Covid-19 pandemic, though it has underperformed the S&P index. CEO Elon Musk’s net worth has also seen a significant decline, dropping almost $140 billion from its peak in 2021. Musk remains Tesla’s largest individual shareholder and holds a 13% stake in the company, with a compensation package that could potentially increase his ownership to 22% pending shareholder approval.
