Tesla share price at two-year lows: What happened and what’s next in store for the electric carmaker

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Tesla share price

Tesla share prices have dropped to their lowest since November 2020 with prices losing above 50% so far this year, largely led by weakening demand and analyst concerns over Elon Musk’s takeover of Twitter.

What’s going on with Tesla?

Investors have been dumping Tesla shares ever since CEO Elon Musk sold some $19 billion worth of his shareholding in the electric carmaker to fund his Twitter takeover.

Whenever large shareholders or the top management sells their stake in the company, it generally leads to other participants liquidating some of their holdings too, purely because of a drop in investor confidence of some sort.

Investors are growing skeptical of the fact that Musk’s added time spent on Twitter will eat into the time to be spent to cater to Tesla’s business interests.

Furthermore, Tesla, which is the world’s largest carmaker by market capitalization, is also facing added regulatory scrutiny, drop in the investor’s perception of the company and added pressure of increased competition in the electric vehicle market.

A Wall Street Journal reported that Tesla’s reputation was already on the decline broadly over the past two years, according to YouGov, a U.K.-based market-research company that runs daily surveys about thousands of brands.

Democrats in the United States are also growing wary of Elon Musk’s highly political statements made through his Twitter handle. Musk, who has an influence in the public image of Tesla and now Twitter, urged voters to support Republicans, which irked democratic party members.

To put things in perspective, the current President of the United States, Joe Biden is a democrat while former President Donald Trump is a republican.

Quick Fact: Tesla shares have slumped 52% since January this year, significantly underperforming the Nasdaq index and the S&P 500 automobile manufacturers sub-index which has lost only 33% and 5% respectively. 

Tesla shares are also set to record a yearly drop for the first time in six years!

The China effect:

Tesla has also come under pressure because of a drop in car sales in China. China is among the key markets for Tesla and its portfolio of electric vehicles. BYD, a Chinese automaker backed by Warren Buffet is seen to consistently eat into Tesla’s market share.

Tesla, last week said that it is slowing production at its Shanghai factory, signaling slowing demand for its vehicles.

China also forced Tesla to recall nearly 68,000 Model S and Model X vehicles which were produced outside of China because of a software glitch which made the cars stop abruptly.

Also, the recent rise in Covid-19 infections in China and the zero covid policies adopted by the Chinese government has only added to Tesla’s demand troubles. 

Tesla’s recent quarterly performance:

Tesla reported revenue of $21.45 billion in Q3 and earnings of $1.05 per share. Revenue is below analysts' expectations of $21.96 billion, but EPS is higher than an estimate of 99 cents per share.

During Q3, the company  produced over 365,000 vehicles and delivered over 343,000 vehicles.

What next for Tesla?

The company has expanded operations to include home solar and large battery storage facilities, which currently account for a small portion of its total revenue. It also recently applied to begin marketing electricity in Texas.

Tesla’s CEO said that he sees a path for the company to be valued more than Apple and Saudi Aramco. Tesla’s market capitalization is around $525 billion while Apple is worth $2.3 trillion and Aramco is worth $1.7 trillion, according to latest data from Refinitiv.

What do analysts say about Tesla?

  • Everbright Securities has an outperform rating on the stock with a share price target of $257.74
  • Southwest Securities has a hold rating on the stock with a share price target of $386
  • Elazar Advisors have a neutral rating on the stock with a share price target of $276. 

To sum it up, of the total 41 analysts that rate the stock, 25 have a buy or higher rating, 12 have a neutral rating and 4 have a sell rating with a median share price target of $275.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.

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