Tesla Inc., the trailblazing electric vehicle (EV) maker, has recently experienced a tumultuous period in the stock market, with its shares showing only a flicker of recovery after a steep decline this year. As the company prepares to release its first-quarter delivery numbers, investors are bracing for potentially underwhelming results, signaling a challenging phase for the EV giant.
This year has been particularly rough for Tesla, with its stock plummeting by 28% through Wednesday, starkly contrasting with the 10% gain of the S&P 500 Index. A combination of factors has contributed to this decline, notably a slowdown in demand for electric vehicles amidst intensifying competition from both traditional automakers and Chinese rivals. The company’s market capitalization has shrunk by over $350 billion since hitting a 52-week high in July, marking one of its worst quarterly performances.
Nicholas Colas, co-founder of DataTrek Research, expressed skepticism about investor confidence in Tesla. “Delivery estimates have been significantly reduced, which has really impacted investor sentiment. It’s challenging to see how the first-quarter numbers can be perceived positively,” Colas stated.
Analysts have been adjusting their forecasts downward, with a notable decrease in bullish ratings on Tesla’s stock. Concerns center around the lack of new catalysts to drive near-term growth. Mizuho Securities analyst Vijay Rakesh highlighted the faster-than-expected deceleration in EV sales expectations, while Sanford C. Bernstein’s Toni Sacconaghi pointed out the stock’s high valuation compared to other large-cap tech companies.
The sentiment among investors has turned cautious, as evidenced by the increasing cost of options protecting against further stock declines. Ivana Delevska, chief investment officer at SPEAR Invest, noted, “There’s already a lot of pessimism reflected in the current stock price. The future trajectory will largely depend on Tesla’s progress in self-driving technology.”
Additionally, doubts are emerging about Tesla’s potential as a major player in artificial intelligence, particularly in the realm of self-driving cars. The realization of this technology, a notoriously complex challenge, remains uncertain.
Despite these challenges, some investors remain hopeful about the long-term prospects of EV adoption globally, supported by strong political backing. However, near-term concerns about Tesla’s core EV business persist, with a keen focus on upcoming delivery volumes and gross margins.
David Wagner, a portfolio manager at Aptus Capital Advisors, summarized the investor outlook: “The key factors for Tesla now are delivery volume and gross margin. The stock’s direction will hinge on these figures and how they compare to expectations.”
As Tesla navigates this precarious phase, its performance in the coming quarters will be crucial in determining whether the recent setbacks are merely temporary or indicative of more profound challenges in the evolving EV market.
