To The Moon

$Tesla Motors(TSLA)$ stock price have wiped out nearly -20% of its value in less than 2 weeks, amid growing concerns that demand for electric cars is starting to weaken, globally. (see below)

The selloff started in mid-October 2023, when Tesla dialed back growth expectations during its Q3 2023 earnings conference.

Next to follow were “grim” commentaries from a few global automakers, as well as Wall Street analysts.

On Mon, 30 Oct 2023, battery-maker $Panasonic Holdings Corporation(PCRFY)$ and chipmaker $ON Semiconductor(ON)$, both also sounded alarms for the EV industry.

The waves of “negative” news could not have been more “timely”, with the US automotive sector, still “caught” battling an extensive negotiation with its labour unions over wages.

Nonetheless, Tesla’s decline stands out: with shares have sunk over -17% since 18 Oct 2023 earnings report.

In contrast, both S&P 500 index and Nasdaq have fallen by -2.80% & -3.4% respectively, for the same measuring period.

In total, Tesla’s stock price retreat has erased about $130 Billion from its Market Capitalization.

According to Morgan Stanley’s analyst — Adam Jonas,

• At the crux of the problem is a capital-intensive sector,

• Investing in an unproven EV strategies amid a world of [a] rising costs, [b] lower prices, [c] rising rates and [d] slower demand.

• The above factors could not have been a worse combination.

• His parting observation is scathing — “what investors seem to be waking up to today is the idea that the tens of billions of dollars invested in EVs may be value destructive rather than value accretive.”

• Adding oil to fire, both internal combustion engine (ICE) veterans — $Ford(F)$ and $General Motors(GM)$ have already indicated their plans to dial back on their EV masterplans. (see above)

• Although it was not stated in black & white, somehow I suspect that the UAW might in a twisted way have an influencing component in the decision.

And just like that, the outlook for EV autos darkened:

• High interest rates have sent the cost to own a car soaring.

• Coupled with persistently elevated inflation, consumers’ ability to afford a big ticket item has been squeezed.

• Naturally, electric vehicles (EVs) still a relatively new technology with an underdeveloped charging ecosystem, are getting hit first.

The stakes for Tesla are naturally “high”, as a pureplay EV maker with an eye-watering valuation.

While some part of its expensive share price reflects its potential to develop self-driving cars, a large part depends on the company’s ability

• Maintain its current dominant position in the EV industry

• Retain its “gapping” profit margins.

As EV demand tapers and Tesla’s aggressive price cuts seem to be losing their ability to boost demand much further, investors are starting to get jittery, reflected in the sharp slide in the share price.

In retrospect, Tesla failed badly on above 2 criteria in its latest Q3 2023 earnings report:

• It has just lost its lead in the Chinese EV market [to BYD]; albeit the “biggest” in the world {for now}. (see below)

• Its operating margin has “crashed” to 7.6%, down from 17.2% YoY, as a result of Tesla’s incessant discounts.

The stock managed to stage a sharp rebound around midday in New York after the company convinced a jury that its Autopilot technology wasn’t responsible for a crash that killed a California driver four years ago. (see below)

0n 31 Oct 2023, Tesla shares closed up +1.8% at $200.84.

• Thankfully, official reports out this week, coupled with the Fed’s decision to hold off interest hike in November 2023 have invigorated US market.

• On the first 2 days of trading in November, Tesla managed to recover some grounds, approximately +3.5% but not enough to offset the > -11.2% lost in less than a month.

• Apparently, Tesla’s owner mr musk is not concerned over the value lost to its shareholders.

• He is busy, getting distracted by his latest pet project -xAI, formed to give OpenAI a run for its money; having been denied to run OpenAI on his terms.

• Will you be concerned (in the capacity of an investor) if the owner is not remotely interested to roll up his sleeves and attempts “damage control”?

My Viewpoints:

• On 03 Jan 2023 Tesla bottomed at $108.10.

• On 18 Jul 2023 Tesla peaked at $293.34.

• On Fri, 03 Nov 2023, Tesla closed at $219.96.

• This represents a potential upside of $73.38 and downside of $111.86.

• Taking into considerations the “bleak” EV outlook (see above), Tesla fans have to decide if the immediate term is a glass “half full” or “half empty”?

• Another consideration that I have covered in a separate post “S&P 500 index rises in Nov & Dec?“ (click to read) .

• Do you think you should bail, sell out now and take profits?

• Do you think its more important to buy back when the TA clearly indicates as such and at a more equitable price?

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