Tesla, a once-beloved stock in the eyes of Wall Street, has faced a tumultuous start to 2024 as its share price has plummeted by 29% year-to-date, marking it as the worst-performing company on the S&P 500. This decline comes at a time when the overall stock market has been performing exceptionally well, with all three major indexes hitting new all-time records in the first quarter. Tesla’s struggles have been attributed to readjusted growth expectations by investors and analysts, as well as significant declines in quarterly profits and revenue growth.
Analysts predict that Tesla’s upcoming first-quarter earnings report will reveal even more alarming figures, with expectations of weak year-over-year growth in vehicle deliveries and its least profitable quarter since 2022. Factors contributing to Tesla’s poor performance include higher interest payments, weakening electric vehicle demand in the U.S. and Europe, and a projected slowdown in China, which accounts for a substantial portion of Tesla’s revenue. Analysts like Dan Ives have described the current situation as a “nightmare quarter” for Tesla due to soft demand in China and sluggish growth.
Tesla’s stock decline has been attributed to falling fundamental expectations rather than narrative-driven factors, as noted by Bernstein analyst Toni Sacconaghi. Despite Tesla’s high valuation compared to other car companies and tech companies, its price to future earnings ratio remains elevated. Tesla’s CEO Elon Musk, who saw a significant decline in his net worth as a result of Tesla’s stock price drop, has the majority of his wealth tied up in the company. The decline in Musk’s fortune follows the rejection of his proposed $51 billion pay package and the volatility of Tesla’s stock price in recent years.
The overall electric vehicle market has seen a decline in demand globally due to cost-conscious consumers and tightening global economic conditions. Electric vehicles continue to be more expensive than traditional gas-powered vehicles, exacerbated by reductions in government incentives and higher interest rates for car loans. Tesla’s stock volatility has been exemplified by its dramatic market capitalization peak in late 2021 and early 2022, followed by a severe decline in stock price. Other EV companies, such as Rivian, NIO, and Fisker, have also experienced significant drops in their share prices in 2024, highlighting the challenges faced by the EV industry as a whole.
The challenges faced by Tesla and other EV companies in 2024 underscore the evolving landscape of the electric vehicle market. As consumer preferences shift towards sustainability and government regulations drive the adoption of electric vehicles, companies like Tesla will need to navigate changing market dynamics and investor expectations. Despite the current challenges, Tesla’s innovative technology and strong brand loyalty position it well for long-term success in the competitive EV market.
