In a shocking turn of events, Tesla’s (NASDAQ: TSLA) fortunes have taken a deep dive in 2024 after a remarkable run in 2023. The electric vehicle (EV) giant found itself grappling with the harsh reality of being the worst-performing stock on the S&P 500 during the first quarter. The somber narrative was compounded by a gloomy earnings report, price slashes in the EV sector, and overarching worries about escalating interest rates stifling consumer demand.
April brought no respite for Tesla as it disclosed a concerning decline in first-quarter deliveries by 9% compared to the previous year, a move worsened by a 10% workforce layoff later in the month. The stock has nosedived by 11% in the past week, perilously perching close to a 52-week low while the S&P 500 basks near an all-time high.
As Tesla tumbles, investors are left questioning if this is an opportune moment to flock to its stock. Dive deeper into the current landscape before making that call.
Image source: Tesla.
Tesla Amidst Transformation
Ever since Tesla gained profitability in 2020 and witnessed a meteoric rise in its stock value, its market valuation has consistently exceeded that of traditional automakers. Despite the recent slump, Tesla still boasts a staggering $500 billion valuation, positioning itself as one of the most valuable stocks in the nation, leaving rivals like General Motors and Ford trailing behind.
Nonetheless, Tesla is presently confronted with multifaceted challenges. Not only did vehicle deliveries plummet in the first quarter, significantly lagging behind production figures, indicating a noticeable demand decline, but profits are expected to witness a sharp downturn owing to plummeting prices amidst burgeoning EV competition.
Furthermore, speculations circulated that Tesla decided to halt progress on its mass-market Model 2 to concentrate on advancing its robotaxi and full self-driving technology. Coupled with additional layoffs exceeding 10% of its workforce, it is evident that demand woes are looming, exacerbated by top executives in key battery and manufacturing roles departing the company.
Down 37% in 2024, Is Tesla Worth the Gamble?
With EV sales faltering amid intensified competition, dwindling demand, and elevated interest rates, Tesla is pinning its hopes on propelling its fortunes through its robotaxi and full self-driving technology.
CEO Elon Musk’s pledge to reveal the company’s robotaxi by August 8 sparks a glimmer of hope. However, Tesla’s track record of delaying commitments and product launches, often as a distress signal, clouds the scenario. Even if the robotaxi debuts in August, navigating through regulatory hurdles may prove formidable.
While autonomous vehicles were anticipated to reign supreme years ago, regulatory constraints, safety apprehensions, and public scrutiny impeded their mainstream adoption. Tesla faces rivalry in the self-driving realm as Alphabet’s Waymo leads with substantial driverless mileage and active passenger services across various cities, whereas General Motors’ Cruise operations saw a halt due to regulatory breaches.
Despite Tesla’s premium valuation, its core growth avenue – EV sales – seems in limbo as long as deliveries and prices continue descending. A revival hinges on robust EV sales and profits resurgence or a triumphant robotaxi showcase, bearing in mind that autonomy is factored into current stock pricing.
However, given the current economic setting and prevailing headwinds in the EV sector, betting on Tesla appears increasingly dicey. Ergo, Tesla’s stock is best skirted at this juncture.
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