Tesla is the worst-performing Magnificent Seven stock year-to-date. How low could it go?

I would like to provide a brief update on Tesla here.

• Tesla( $Tesla Motors(TSLA)$ ) has returned -29.43% year-to-date, trailing behind other Magnificent Seven Stocks such as Nvidia( $NVIDIA Corp(NVDA)$ ) (+76.75%), Meta Platforms( $Meta Platforms, Inc.(META)$ ) (+43.09%), Amazon (+15.41%), Microsoft (+8.22%), Alphabet (-3.06%), and Apple (-11.21%).

• The underperformance can be attributed to sluggish sales in China, declining profit margins, and analyst downgrades.

• In February, Tesla sold 30,141 vehicles in China, marking an 11.15% YoY decrease and a 24.42% MoM drop. The retail sales of passenger NEVs in China for the same month totalled 388,000 units, with a sales growth of -11.6% YoY and -42.1% MoM. This indicates that Tesla's slow sales in China are not isolated but represent an industry-wide issue.

• Tesla's narrowing EV profit margin, now comparable to the ICE profit margin, may deter investors.

• Full Self-Driving (FSD), which is expected to drive Tesla’s future profit margin, has yet to reach level 4 or 5 autonomous driving.

• Apple’s decision to wind down its EV efforts may signal a grim outlook for EV, but it could be positive for existing EV manufacturers as they can now compete without Apple. Apple's recent setback in EV also suggests that the 'moonshot' solutions adopted by Google’s Waymo and Amazon’s Zoox for full automation may not be the best approach. Instead, Tesla's step-by-step path (ADAS) toward autonomy may still be the most effective.

• The current AI landscape is diverse. While Generative AI has made groundbreaking breakthroughs in large language models, Tesla's AI system for humanoid robots and autonomous driving does not have the same breakthough as it is not based on generative AI.

• Despite a weaker near-term earnings outlook, our long-term bullish perspective on Tesla persists. Contributing factors include the anticipated Next Generation Platform (expected in 2025), a potential resurgence in gasoline prices driving EV adoption, better-than-expected execution on earnings targets, the potential rollout of a revamped Model Y, and prospects for multiple expansions (PE expansion) given the rate cut outlook.

• We are not surprised if Tesla’s share price weakness persists this year, but we see it as potential accumulation opportunities. Please refer to the previous article for how I derived the support levels based on TA.

• Support levels: USD172.78, USD142.95, and USD106-107.

Source: Tiger Brokers PC App