The first quarter of 2024 is in the books, and it’s official: Tesla (NASDAQ: TSLA) was the worst-performing stock in the Nasdaq-100.
The electric vehicle (EV) maker’s stock plunged 29.3% during the quarter. That narrowly edged out Sirius XM Holdings (down 29.1%) for the bottom spot, ahead of other Nasdaq-100 laggards, such as Lululemon Athletica, Charter Communications, and Warner Bros. Discovery.
So, is this a buying opportunity for investors, or is it time to cut losses?
What’s the current situation with Tesla?
Tesla has been making headlines for all the wrong reasons. Let’s start with the company’s biggest problem: Overall demand for EVs is falling short of expectations.
Several factors contribute to this shortfall:
- Challenges with high interest rates and prices
- Lagging EV infrastructure (charging stations)
- Manufacturing delays
- Tax credit confusion and uncertainty
- An overall lack of consumer acceptance
In short, EV sales have plateaued at around 9% of overall new vehicle sales, below industry expectations. Despite forecasts for a more substantial rise, challenges persist, impacting all EV manufacturers, especially Tesla.
Tesla faces doubts in achieving its ambitious production goals and recently reported a 9% decline in deliveries. CEO Elon Musk acknowledged a potential slowdown in growth, citing projects like the Gigafactory Texas launch.
Moreover, the company grapples with:
- Increased competition in the vital Chinese market
- Supply chain disruptions from Red Sea unrest
- Production halts due to vandalism at its German factory
- Public sentiment affected by Musk’s Twitter, now X, involvement
In essence, Tesla confronts challenges both at a macro level (slow EV market growth) and micro level (production slowdown and competitive pressures).
Examining Tesla’s appealing valuation
Despite these hurdles, Tesla retains numerous strengths. The company excels in EV production, with profitable operations that outshine competitors like Rivian. Tesla yielded $15 billion in net income over the last year, boasting robust profit margins compared to industry peers.
As a result, Tesla’s price-to-earnings (P/E) ratio has declined to 40, marking one of its lowest valuations since January 2023’s record low of 30.
Notably, Tesla’s stock more than doubled in 2023, experiencing a remarkable surge from under $120 per share to over $240.
Is Tesla an advisable investment now?
In addition to its alluring valuation, Tesla possesses other promising elements. CEO Elon Musk recently revealed that the anticipated robotaxi will launch on Aug. 8. The robotaxi’s impact on the stock remains uncertain, yet its significance in Tesla’s self-driving pursuit could be substantial.
Therefore, for long-term investors who trust in the EV evolution and Tesla’s self-driving endeavors, the current market dip might present an excellent buying opportunity.
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Jake Lerch holds positions in Lululemon Athletica and Tesla. The Motley Fool has positions in and recommends Lululemon Athletica, Tesla, and Warner Bros. Discovery. The Motley Fool follows a disclosure policy.
