The Many Forces Fueling Tesla’s $860 Billion Tumble

Bloomberg2023-01-06

Investors in Elon Musk’s day job are feeling a lot less excited about the future.Until fairly recently, higher-end Tesla cars had a setting called “ludicrous mode,” which used their high-torque ...

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Comments

oliana
2023-01-06
oliana
Agree
OngCK
2023-01-06
OngCK
Like and comment pls
Jenny88888
2023-01-06
Jenny88888
Ok
- Jenny88888:
  Ok
boonhong21
2023-01-06
boonhong21
I'm ok
V K
2023-01-06
V K
Pls like tyvm[Happy]
- OngCK:
  ok
Rjn828
2023-01-06
Rjn828
Not suprised

Leave a comment

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In the past year, ludicrous mode has also been an apt description of Tesla Inc.’s share price—except it’s been running in reverse.From about $1.2 trillion at the start of 2022, the company’s market value has fallen more than 70%, to $340 billion. That still makes it by far the most valuable automaker in the world. Ford Motor, General Motors, Stellantis and Toyota Motor are worth about the same amount combined. But another way to put it is that Tesla’s fall has wiped out the equivalent of the value of four major car companies, more than twice over. And Chief Executive Officer Elon Musk has made history by losing more money in his personal fortune than anyone ever.The most obvious explanation is that Tesla is an especially high-growth, high-speculation stock in a market that pumped up such companies in 2020 and 2021 before abruptly turning on them in 2022 as interest rates rose and the stock market fell overall. Musk pointed to this dynamic in a mid-December Twitter post. (More on the tweets in a moment.) He said that when people can earn higher rates without risk, they tend to move money “out of stocks into cash.”Yet, Tesla’s decline is conspicuous even among once-frothy tech stocks. In 2022 the stock was the worst performer in the NYSE FANG+ Index—a gauge of 10 large technology companies that includes Amazon.com, Apple and Meta Platforms. That index is down about 40% over the past year, which is still much less than Tesla’s drop. The carmaker’s shares had largely traded in line with other major technology stocks last year until around September, then they diverged sharply. In the past three months, Tesla fell 59%, compared with a 6.7% loss for the FANG+ and a 6.7% rise for the S&P 500.The rest of the explanation is what Mark Stoeckle, CEO of Adams Funds, which holds Tesla shares, calls “a cocktail of misery.” As a leader, Musk has given any investor nervous about Tesla’s lofty valuation plenty of headlines to justify selling, while the company itself deals with new challenges.Start with Musk’s Twitter adventures—both as a heavy user of the social media platform and now as the owner. The first blow came in November 2021, when he conducted a Twitter poll asking whether he should sell 10% of his stake in Tesla. Respondents said yes. Within two months, Musk had sold $16 billion of Tesla shares. Things escalated quickly in 2022 after he announced his intention to acquire Twitter Inc.After trying to wriggle out of the deal, Musk finally had to go through with it. All along, Tesla investors worried about his needing to sell even more of his stake in the car company to pay for Twitter. Another concern was that his obvious preoccupation with the platform was distracting him from Tesla.Musk has now sold almost $40 billion of Tesla shares since late 2021. And though he recently said he has no plans to sell more stock anytime soon, the market almost always dislikes the idea of a company insider selling, taking it as a sign of low confidence.At the same time, Musk has stirred the pot of countless social and political controversies since taking over Twitter, with his own trolling tweets and sudden changes to moderation policies. The chaotic Twitter sideshow matters because Musk’s persona is so closely associated with Tesla. “A lot of damage has been done to the brand and the story, and the news flow may stay negative on Elon Musk for a while,” says Catherine Faddis, senior portfolio manager at Fernwood Investment Management LLC.Still, most Tesla investors are probably more focused on the electric vehicle business—and the company has simply faced a high bar of expectations. After all, this is a stock that rose more than 1,100% over 2020 and 2021. Whereas analysts on average expect GM’s or Ford’s revenue to expand at a pace of low- to mid-single-digit percentages over the next five years, for Tesla they model an average 25% jump every year.That thesis has started to show some cracks, after the company’s vehicle deliveries failed to meet analysts’ expectations for three straight quarters. The latest miss was reported on Jan. 2, sending the stock to its lowest since August 2020. Tesla still delivered a 40% annual increase while setting a quarterly record, but to many it was a relative disappointment that augurs a new reality for the EV industry as well as for Tesla.Economists are warning of a possible global recession in 2023. Meanwhile, high inflation over the past year and the increased cost of financing for a car are pushing consumers to delay plans for purchasing expensive vehicles, and electric cars are typically pricier than gas-fueled ones.Tesla rarely discounts, but it recently offered customers in the US a $7,500 yearend deal to boost deliveries. It’s also cut prices and production in China. “Our base case assumption is that year-over-year growth (while remaining impressive overall) is likely to decline each year from here on out,” JPMorgan Chase & Co. analyst Ryan Brinkman wrote in a note to clients after the release of Tesla’s latest quarterly delivery numbers.An economic slowdown will be responsible for some of that, but Brinkman also points to the rising threat from competition. Older carmakers may have been late to the electric game, but they’re planning to flood the market with a slew of EVs over the next few years. A report from S&P Global Mobility in November found that Tesla’s share in EV sales was set to drop to below 20% by 2025, from a dominant 79% in 2020.Bulls can point to how the EV market is still growing fast enough for Tesla to sell more cars even if its share drops. For now the company is still synonymous with EVs for vast groups of potential electric car buyers who haven’t made the switch. And the colossal Japanese auto industry has been slow to move on EVs.“The current growth story for Tesla is positive, and while we’ve seen a large drop in the price of Tesla’s stock, we haven’t seen any material decline in the operations of the company,” says Brian Mulberry, client portfolio manager at Zacks Investment Management. “Sales estimates are still stable, margins are improving, and earnings are growing.”As Tesla’s history in the bull market shows, the stock is sensitive to market psychology. Among big tech-related stocks, it’s most similar to Meta, which fell 64% last year. Both companies face specific issues—with Meta they include slipping social media revenue and CEO Mark Zuckerberg’s focus on the metaverse—but also a fierce, general mood of skepticism among investors. They’re less willing to cut managers slack today based on hopes for growth in the farther-off future. That might shift quickly again should economic data and Tesla’s results improve.Adams Funds’ Stoeckle says Tesla stock still isn’t cheap, even at these prices. It remains an optimist’s bet. “It’s important not to simply expect that a significant drop in the price of a stock means it’s therefore attractive—so many stocks in 2022 were rerated and deserved to be,” he says. “There are enough questions about the operations of Tesla—China demand, price cuts, good competition—that makes it hard to declare the current valuation is correct.”","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9959291626,"gmtCreate":1672987059366,"gmtModify":1676538766716,"author":{"id":"4087619900366220","authorId":"4087619900366220","name":"oliana","avatar":"https://static.tigerbbs.com/c145e3dccc975a6569afcf9567171ef4","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"4087619900366220","idStr":"4087619900366220"},"htmlText":"Agree","listText":"Agree","text":"Agree","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9959291626","repostId":1128856051,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9959299676,"gmtCreate":1672986128395,"gmtModify":1676538766663,"author":{"id":"3575595150850001","authorId":"3575595150850001","name":"OngCK","avatar":"https://static.tigerbbs.com/d48712c91608dbd0ea50712fabae2287","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3575595150850001","idStr":"3575595150850001"},"htmlText":"Like and comment pls","listText":"Like and comment pls","text":"Like and comment pls","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9959299676","repostId":1128856051,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9959677349,"gmtCreate":1672982348782,"gmtModify":1676538766345,"author":{"id":"3583651223381792","authorId":"3583651223381792","name":"Jenny88888","avatar":"https://static.tigerbbs.com/2c1ca72f49f88af75653644150955364","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3583651223381792","idStr":"3583651223381792"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":9,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9959677349","repostId":1128856051,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105472845,"gmtCreate":1672982355840,"gmtModify":1672982368898,"authorId":3583651223381792,"author":{"id":3583651223381792,"idStr":"3583651223381792","authorId":3583651223381792,"name":"Jenny88888","avatar":"https://static.tigerbbs.com/2c1ca72f49f88af75653644150955364","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9959677349,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Ok</span>","text":"<span class=\"s1\">Ok</span>","html":"<span class=\"s1\">Ok</span>"}],"langContent":"EN"},{"id":9959673174,"gmtCreate":1672980726098,"gmtModify":1676538766078,"author":{"id":"3575147848250182","authorId":"3575147848250182","name":"boonhong21","avatar":"https://static.tigerbbs.com/4576487764c99ea59dfd1cfcdf89da5b","vip":1,"crmLevel":2,"crmLevelSwitch":1,"authorIdStr":"3575147848250182","idStr":"3575147848250182"},"htmlText":"I'm ok","listText":"I'm ok","text":"I'm ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":10,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9959673174","repostId":1128856051,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9959679920,"gmtCreate":1672980589661,"gmtModify":1676538766046,"author":{"id":"3577323914202336","authorId":"3577323914202336","name":"V K","avatar":"https://static.tigerbbs.com/536d624e5750dcffec704eeed9bc003b","vip":1,"hat":"https://static.tigerbbs.com/ae1f49570794979e009a5efdeb6f4789","crmLevel":8,"crmLevelSwitch":1,"authorIdStr":"3577323914202336","idStr":"3577323914202336"},"htmlText":"Pls like tyvm[Happy]&nbsp;","listText":"Pls like tyvm[Happy]&nbsp;","text":"Pls like tyvm[Happy]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":9,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9959679920","repostId":1128856051,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105473576,"gmtCreate":1672986142459,"gmtModify":1672986155529,"authorId":3575595150850001,"author":{"id":3575595150850001,"idStr":"3575595150850001","authorId":3575595150850001,"name":"OngCK","avatar":"https://static.tigerbbs.com/d48712c91608dbd0ea50712fabae2287","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9959679920,"type":1,"supId":0,"prevId":0,"content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>"}],"langContent":"EN"},{"id":9959647720,"gmtCreate":1672980289160,"gmtModify":1676538766015,"author":{"id":"3583839588979540","authorId":"3583839588979540","name":"Rjn828","avatar":"https://static.tigerbbs.com/16e7a5cec19c9e23b54723e33e43d828","vip":1,"crmLevel":4,"crmLevelSwitch":1,"authorIdStr":"3583839588979540","idStr":"3583839588979540"},"htmlText":"Not suprised","listText":"Not suprised","text":"Not suprised","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":10,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9959647720","repostId":1128856051,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":180,"commentSize":16,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; 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