Insights

Is it the end of the road for Tesla?

By Paul Reid

01 February 2024

3146 Tesla

In this article, we will cover Exness opinions alongside reporting from Barron's, a commercial partner of Exness.

TSLA has been on a wild and downward trend since July 2023. It’s falling again, and negative market sentiment is growing. Is this the end of Tesla, or will we all miss out on an epic comeback when we least expect it?

For the answer, we must first see if the current challenges are transitory.

One factor for the current loss of confidence is the increasing competition in the electric vehicle (EV) market. While that sounds counterintuitive, Tesla was once the undisputed leader in the EV space, but other automakers have been making significant investments in EV development. Tesla's market share has been declining as a result, with its dominance no longer as secure as it was. But that doesn’t mean the company has one foot in the grave.

Another factor weighing on Tesla's stock price is the overall economic climate. The US economy faces fiscal challenges, including rising inflation and interest rates, and supply chain disruptions. Such concerns make consumers less likely to spend money on luxury goods like Tesla, putting pressure on the company's margins. 

The behavior of Tesla CEO Elon Musk has also been a source of unease for investors. Musk is known for his outlandish statements and impulsive behavior, making some investors worry that this could damage Tesla's reputation and company prospects. Just how that might manifest is unclear, but supportive sentiment is a fickle beast: here today, gone tomorrow.

The factors currently weighing heavy on Tesla's stock price are likely to persist, and it’s therefore possible it could fall further. While some of the issues affecting TSLA will be momentary, they won’t be subject to change any time soon. It’s going to be a brutal 2024 for Tesla and TSLA.

The below article from Barron’s makes this point loud and clear.


Tesla Stock Is Falling. Sell It Now, Says Analyst.

BY AL ROOT | UPDATED JAN 31, 2024 07:47 AM EST

Tesla shares were falling early Wednesday after a Delaware court late Tuesday voided CEO Elon Musk’s pay package, which awarded him some 300 million performance-based options.

The ruling, which essentially nullifies Musk’s 2018 pay package worth roughly $56 billion if Tesla’s market capitalization hit $650 billion—which it has in the past—could have wide implications for the rest of corporate America.

Judge Kathaleen McCormick “was critical of [Telsa’s] corporate governance,” says Carl Tobias, Williams Chair in Law at the University of Richmond. “It is an important precedent for corporate governance.”

Tesla stock was off 2.8% lower in premarket trading Wednesday. Nasdaq Composite futures were down 1.3%. Tesla shares have fallen 19.7% over the past month while the S&P 500 and Nasdaq Composite have risen 4.6% and 6.3%, respectively.

The ruling creates an overhang for Tesla stock, wrote Baird analyst Ben Kallo in a Wednesday report. Tesla’s board will have to do something. Without the award, Musk has, essentially, received no compensation for running the company for the past few years. Kallo expects an appeal.

Along with the overhang, “we also see risk to first-quarter delivery numbers due to the Red Sea shipping disruptions and their impact on production at Giga Berlin,” wrote Kallo. “We continue to like Tesla long term, but see downside near term.”

Wall Street expects Tesla will deliver some 494,000 vehicles in the first quarter, according to FactSet, up from about 485,000 delivered in the fourth quarter of 2023.

He has designated the stock a “bearish fresh pick.” Fresh pick designations are used at Baird to denote timely calls. Kallo sees Tesla stock heading lower now. The bearish call comes despite his Buy rating and $300 price target.

He doesn’t have a bearish target. If the stock drops, Kallo can simply remove the Fresh Pick tag in another report.

Coming into Wednesday trading, Tesla stock was trading well off its 52-week high of $299.29, set last summer. Shares were outperforming some of those of its competitors Wednesday, as Lucid Group shares fell 0.3% to $3.45, NIO shares fell 2% to $5.67, and BYD shares were down by 2% in Hong Kong trading. General Motors stock rose 0.1% to $38.09.

Tesla’s trading volume of 105.7 million shares on Tuesday was 12 million below its 50-day average daily volume of 117.7 million.

Kallo rates Tesla stock at Buy. Overall, 38% of analysts covering Tesla stock have Buy ratings, with an average price target of about $217. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.


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Author:

Paul Reid
Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.