Tesla faces turbulent times as stock dips to new low

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17th April 2024 – (Texas) Tesla, the electric vehicle powerhouse, has experienced a significant downturn in its stock value, with a 3% drop that brought shares to their lowest intraday level since 27th April, 2023, hovering around $154 each. This decline marks a stark contrast from the company’s late 2021 valuation, which soared past $1 trillion. Now, Tesla’s market capitalization has plummeted below $490 billion, nearly 40% down this year, diverging sharply from broader market gains.

The downturn in Tesla’s fortunes is accentuated by its share price falling by 2% or more in six of April’s twelve trading sessions, casting a shadow over the spring trading season for its investors. This steep decline precedes the company’s forthcoming earnings report for the first quarter of 2024, anticipated next week, which is expected to continue the trend of disappointing results relative to Tesla’s historical performance of robust profit and sales growth.

This recent financial turbulence follows Tesla’s announcement of a significant reduction in its workforce by more than 10%, a decision influenced by the weakest quarterly delivery growth since the onset of the COVID-19 pandemic. This move underscores the challenges Tesla faces as it navigates a tough global electric vehicle market and internal strategic shifts.

Deutsche Bank analyst Emmanuel Rosner expressed concerns about Tesla’s upcoming earnings, suggesting potential strategic shifts that could fundamentally change the company’s trajectory. “We continue to worry about the setup for TSLA earnings,” Rosner noted, highlighting the risks of Tesla prioritizing more conceptual projects like its self-driving taxi over the much-anticipated, more affordable electric vehicle model. Such a strategy shift could lead to significant changes in Tesla’s investor base, potentially alienating current investors drawn by Tesla’s dominance in EV volume and cost efficiency.

Despite maintaining a $189 price target on Tesla, which suggests a roughly 20% upside, Rosner reflects broader Wall Street apprehensions about Tesla’s faltering execution in its core EV operations as it loses market share. The once formidable cash flows that attracted investors have significantly reduced, with Tesla’s free cash flow in the previous year falling sharply to $4.4 billion from $7.6 billion in 2022. Analysts now project even more modest cash flows for 2024, anticipating the lowest figures since 2020.

The financial downturn has also impacted Tesla’s CEO, Elon Musk, who has seen his net worth diminish by approximately $66 billion since the start of the year, as per Forbes’ estimates. This stark decrease underscores the broader implications of Tesla’s stock performance on its key stakeholders.

Despite the challenges, Tesla remains the world’s most valuable car company, a title it has held since early 2020. However, the gap between Tesla and its closest competitor, Toyota, which stands at a market cap of about $320 billion, has narrowed significantly from approximately $540 billion at the end of last year to around $170 billion.