Tesla Stock Sinks To 29-Month Low—But One Analyst Says It Remains On The ‘Right’ Track

Topline

Shares of Tesla touched their lowest levels since 2020 on Friday as Wall Street reacted to the latest news indicating lagging demand for its electric vehicles, though the American automaker still has “exponentially more growth ahead of it than behind it,” according to one prominent analyst.

Key Facts

Tesla stock fell as much as 7.7% to $101.81 during early trading before recovering to a 3% drop to $107.04, hitting its lowest split-adjusted price since August 12, 2020, with shares down 41% over the last month and 70% over the last year.

The latest dip comes after Tesla lowered prices in China for its Model 3 and Model Y cars by as much as 14%, digested by investors as the latest news indicating softening demand in the company’s largest market outside of the U.S.

Despite the overall sour response to the price cuts in China, it’s what Tesla “needed to do to stimulate demand,” Wedbush analyst Dan Ives told Forbes, predicting margins should “hold relatively steady” with the likely uptick in sales.

The primary drag on Tesla stock recently has been concerns about demand, which the company is “doing the right strategic moves” to address, Ives said, but added that a majority of Tesla’s 2022 selloff was driven by the actions of Tesla CEO Elon Musk and his high-profile Twitter takeover.

Key Background

The latest Tesla nosedive comes during a strong day for the broader market, with the Dow Jones Industrial Average gaining 1.1%, or 370 points, after the latest employment data revealed a weakening labor market, a sign that the Federal Reserve may soon stand down on its most aggressive interest rate increases. Musk, who first agreed to buy Twitter last April and finally took over the social media company in October, has sold $22.9 billion in Tesla stock since April and spent much of his time leading Twitter as its CEO. Formerly the world’s wealthiest man, Musk’s fortune is down 58% from its November 2021 peak, dropping 2.2% Friday to $135.4 billion, per Forbes’ calculations. Musk has said on social media that he plans to stop selling his shares in Tesla and to soon step down as Twitter CEO.

What To Watch For

There are two scenarios that could help stop Tesla stock’s “unrelenting selloffs” later this month, according to Ives: The appointment of a new Twitter CEO by the end of the month and Musk vowing to stop selling Tesla shares during the firm’s quarterly earnings call January 25.

Surprising Fact

Tesla shares have now lost 3% or more in 12 of the last 24 days the market was open. It has been among the most volatile large stocks in recent months, regularly shedding tens of billions of dollars in market capitalization, and was the second worst-performing company on the S&P 500 in 2022.

Further Reading

Tesla Stock Crash Worsens: Losses Top $895 Billion As Rival Carmaker Warns Of ‘Challenging’ Weeks Ahead (Forbes)

Tesla And Apple Hit Multiyear Lows As Tech Onslaught Continues Into 2023 (Forbes)

Cathie Wood Buys $19 Million In Tesla Stock As New ‘Major Worry’ Emerges (Forbes)

Comments are closed.