Tesla shares are suffering from a New Year’s hangover from demand concerns, delivery issues

  • S&P 500 stocks lose on first trading day of 2023
  • Selloff knocks $50 billion off market cap
  • Tesla Misses Q4 Vehicle Delivery Estimates
  • The EV company is still the world’s most valuable automaker

Jan 3 (Reuters) – Tesla Inc (TSLA.O) Shares got off to a rocky start in 2023, plunging more than 12% on Tuesday amid growing concerns about weak demand and logistical problems holding back supplies for the world’s most valuable automaker.

Tesla, once valued at more than $1 trillion, has lost more than 65% of its market value in a turbulent 2022, increasingly challenged by other automakers and facing production problems due to the Covid lockdown in China.

Tuesday’s slide knocked nearly $50 billion in market value, roughly equal to the valuation of rival Ford Motor Co. (FN)It sold three times as many cars as Tesla last year.

The sell-off came as Tesla missed market expectations for fourth-quarter deliveries, despite shipping a higher number of vehicles.

Reuters Graphics

“Tesla, as it has grown, is now entering a phase of more solid but slower growth,” said Morningstar analyst Seth Goldstein. Being a major automaker, he added, “is likely to feel the brunt of the economic downturn.”

Many Wall Street analysts said they expect more pressure on stocks in the coming months from competition and weak global demand.

Global automakers have faced a slump in demand in China over the past few months, as the spread of COVID-19 in the world’s top auto market has hit economic growth and consumer spending. Tesla offers higher discounts there and subsidizes insurance costs.

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At least four brokerages cut their price targets and earnings estimates on Tuesday, pointing to the delivery miss and Tesla’s decision to offer more to boost demand in China and the United States, the two biggest global auto markets.

The company’s shares were the worst performers of the S&P 500 index (.SPX) A share fell to $104.64 on Tuesday — the lowest since August 2020. More than 220 million shares changed hands during regular trading hours.

The electric vehicle maker’s performance in 2022 was the worst in the S&P 500 index.

Members of the media and guests surround the Tesla Model Y and Model 3 during Tesla Thailand’s official launch event on December 7, 2022 in Bangkok, Thailand. REUTERS/Athit Perawongmetha

“You have a lot of things working against the stock. One is obviously Musk’s involvement on Twitter,” said Dennis Dick, market structure analyst and trader at Triple D Trading.

Tesla’s market value has fallen by about $370 billion since CEO Elon Musk closed a deal to buy social media giant Twitter.

Some of that fall has come from his sale of stock to finance the $44 billion deal, while the stock also tumbled amid concerns among investors that Musk was being sidetracked by the social media giant.

At about $341 billion, Tesla is still the world’s most valuable automaker, even though its output is a fraction of rivals like Toyota Motor Corp. (7203.D).

Tesla shares biggest loss among Big Tech Tesla shares biggest loss among Big Tech since April

Tesla delivered 405,278 vehicles in the fourth quarter, short of analysts’ estimates of 431,117. Through 2022, its deliveries increased by 40%, missing Musk’s 50% annual target.

The result “came at the cost of higher incentives, suggesting lower price and range,” brokerage JP Morgan said in a note, lowering its price target from $25 to $125.

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The average price target of 41 analysts on the stock is $250, more than double the current price, according to Refinitiv data. The lowest price offered by Roth Capital Partners is $85.

The shortage highlights the logistical hurdles faced by a company known for its quarter-end delivery rush. The gap between production and supply has widened to 34,000 vehicles as more cars are stuck in traffic.

The automaker plans to run a reduced production schedule at its Shanghai plant in January, extending reduced production that began in December until 2023, Reuters reported.

Meanwhile, California-based electric vehicle maker Rivian Automotive Inc (RIVN.O) It missed its 25,000-unit production target by 2022 by a wide margin.

Reuters Graphics

Reporting by Aditya Soni, Eva Mathews and Akash Sriram in Bangalore; Additional reporting by Amruta Khandekar; Editing by Thomas Janowski, Shaunak Dasgupta and Arun Koyur

Our Standards: Thomson Reuters Trust Principles.

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