Tesla down 30% year-to-date: S&P 500's biggest loser
quick look
- Tesla started 2024 as part of the esteemed “Magnificent Seven,” after a stellar 2023.
- The company finds itself facing a 30% decline in its shares year-to-date, making it the biggest loser on the S&P 500.
- Amid signs of slowing electric vehicle sales, Tesla faces challenges that test its growth narrative and market sentiment.
Tesla, the leading electric vehicle (EV) maker, has started the year well, joining the ranks of the “Magnificent Seven” group thanks to its impressive triple-digit stock gains in 2023. However, after nearly three months of… Beginning of the Year Last year, Tesla's fortunes took a sharp turn. The company's stock is down nearly 30% year to date, wiping about $230 billion off its market value and earning it the dubious title of the S&P 500's biggest loser so far this year.
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The stark reversal in the company's fortunes contrasts sharply with its achievements the previous year. The company now trails crisis-hit planemaker Boeing, which saw a nearly 29% decline in the wake of a major accident with an Alaska Airlines 737 Max. The event raised investor concerns about safety, putting Tesla's performance in a dim light.
Tesla's decline is primarily due to signs of a slowdown in electric vehicle sales. After giving up its crown as the world's largest electric vehicle seller to Chinese rival BYD last year, there are growing concerns about weak demand for Tesla vehicles, both in the US and internationally. This downturn has sparked discussions about Tesla's inability to maintain its high-growth stock status, a sentiment echoed by Morningstar analyst Seth Goldstein. “It's supposed to be a high-growth stock, and this year it looks like it's not going to achieve that level of growth,” Goldstein said, highlighting the market's sensitivity to slowing growth in such companies.
Critical moments ahead
With Tesla set to release its first-quarter earnings report on April 17, 2024, the risks are high. Analysts expect a significant slowdown in earnings per share. This slowdown comes compared to the last quarter of 2023. Therefore, these results are likely to be pivotal. They will shape Tesla's perception among investors. “The first quarter results will be very beneficial for Tesla’s trajectory this year,” Goldstein noted. He added that there is a possibility of further decline in the value of shares. This may happen if the growth narrative falters.
Despite the challenges, Tesla has strong supporters. For example, analyst Garrett Nelson of CFRA set a $275 price target for Tesla stock. This goal is much higher than its current level. It highlights the controversy surrounding company valuation. Currently, Tesla shares trade at 55 times its forward earnings. This figure, despite recent declines, indicates a premium valuation. Especially when compared to its peers within the “Greater Seven”.
Amid the financial turmoil, concerns are growing among some shareholders. They wonder whether Elon Musk's leadership style negatively affects the company's performance. Investor Ross Gerber expressed the need for a “real CEO.” He believes the new CEO can guide the company forward. Gerber's comments highlight increasing scrutiny of Musk's role amid the stock's decline.
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