January 29, 2023

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Tesla shares are suffering from a New Year’s hangover due to demand concerns and delivery issues

  • Stocks are the top loser in the S&P 500 on the first trading day of 2023
  • The sale cuts $50 billion from the market value
  • Tesla miscalculate Q4 vehicle delivery
  • The EV company is still the most valuable automaker in the world

Jan 3 (Reuters) – Tesla Inc (TSLA.O) Stocks started 2023 with a bang, dropping more than 12% on Tuesday on mounting concerns about weak demand and logistical problems that have hampered deliveries for the world’s most important automaker.

Once valued at more than $1 trillion, Tesla has lost more than 65% of its market value in a turbulent 2022 that has been increasingly challenged by other automakers and facing production issues stemming from China’s COVID shutdowns.

Tuesday’s slide slipped nearly $50 billion in market value, roughly equaling the valuation of rival Ford Motor Co. (FN)which last year sold three times as many Tesla cars.

The sale came after Tesla missed market expectations for fourth-quarter deliveries despite shipping a record number of vehicles.

Reuters graphics

“Tesla, as it has grown, is now entering a phase of growth that is still strong but slower,” Morningstar analyst Seth Goldstein said. Being a major auto producer, he added, “it is likely to feel more of an impact from the economic slowdown.”

Several Wall Street analysts said they expect more pressure on the stock in the coming months from increased competition and weaker global demand.

Global automakers have grappled in the past few months with a slump in demand in China, the world’s largest auto market, as the spread of the COVID-19 virus has hit economic growth and consumer spending. Tesla offers great discounts there and a subsidy for insurance costs.

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At least four brokerages cut their price targets and profit estimates on Tuesday, pointing to non-delivery and Tesla’s decision to offer more stimulus to boost demand in China and the United States, the two largest global auto markets.

The company’s stock was the worst performer on the S&P 500 benchmark (.SPX) On Tuesday, it fell to $104.64 a share – the lowest level since August 2020. More than 220 million shares changed hands during regular trading hours.

The electric car maker’s performance in 2022 was among the worst on the S&P 500.

Members of the media and guests surround the Tesla Model Y and Model 3 during Tesla’s official launch event in Thailand in Bangkok, Thailand, December 7, 2022. REUTERS/Athit Perawongmetha

“You have a lot of things working against the stock. Obviously one of them is Musk’s Twitter post,” said Dennis Dick, market structure analyst and trader at Triple D Trading.

Tesla’s market capitalization has fallen about $370 billion since CEO Elon Musk finalized the deal to buy social networking company Twitter.

Some of that drop came from selling his stake to fund the $44 billion deal, while the stock also fell due to concerns among investors that the social media company was distracting Musk.

Worth about $341 billion, Tesla remains the world’s most valuable automaker, even though its output is a fraction of competitors like Toyota Motor Corp. (7203.T).

Tesla stock is the biggest loser among Big Tech Tesla has been the biggest loser among Big Tech since April

Tesla delivered 405,278 vehicles in the fourth quarter, short of analyst estimates of 431,117. For the full year of 2022, deliveries were up 40%, missing Musk’s annual target of 50%.

Brokerage JPMorgan said in a note that the result “came at the cost of higher incentives, which indicate lower prices and margins,” and cut its price target by $25 to $125.

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The average price target of 41 analysts per stock was $250, more than double the current price, according to Refinitiv data. The lowest price is $85, from Roth Capital Partners.

The shortfall highlighted the logistical hurdles facing a company known for its rush to deliver at the end of the quarter. The gap between production and delivery widened to 34,000 cars as more cars stopped in transit.

The automaker plans to run a reduced production schedule in January at its Shanghai plant, extending the reduced production it began in December into 2023, Reuters reports.

Reuters graphics

Additional reporting by Aditya Soni, Eva Mathews and Akash Sriram in Bengaluru; Additional reporting by Amruta Khandekar. Editing by Tomasz Janowski, Shonak Dasgupta, and Arun Koyor

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