Tesla’s acrobatics have wiped out half of the Meteoric 2020 rally

(Bloomberg) – Shares of Tesla Inc. fell on Tuesday as reports of plans to temporarily halt production at a factory in China raised concerns about demand risk and sent stocks on their longest losing streak since 2018.

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Shares of the Elon Musk-led company fell as much as 8.3% to $112.88, marking the seventh consecutive day of declines. The electric vehicle maker’s market valuation has fallen to about $357 billion, lower than that of Walmart Inc., JPMorgan Chase & Co. and Nvidia Corp. This latest sell-off will cost Tesla its spot among the top 10 most valuable companies in the S&P 500 Index, a distinction it has held since joining the benchmark in December 2020.

News of the production cut in Shanghai comes shortly after last week’s report that Tesla offered a $7,500 discount to US consumers to receive its two top-selling models before the end of the year, which combined add to the increase. concerns that demand is falling. For Tesla, which is valued on its future growth prospects, these worries reflect a significant risk.

“Most of the weakness in equities this year is due to indicators that global demand is faltering,” said Craig Irwin, an analyst at Roth Capital Partners. Tesla’s estimated revenue growth is “still staggering, but not amazing given its $385 billion market valuation,” he said, referring to value last weekend.

Analysts expect average revenue to grow 54% in 2022 and 37% in 2023, data compiled by Bloomberg shows.

Hopes that Tesla will become the leading electric vehicle company in a future dominated by electric cars have driven the stock to a spectacular eightfold in 2020, earning a spot in the S&P 500 and, at one point, becoming more and more popular. into the fifth most valuable stock on the gauge list.

Breakthrough relaxation

But this year the dismantling took place equally quickly. It has lost about two-thirds of its value amid Musk’s Twitter takeover and related distractions, investor worries about growth assets and, most recently, fears that high inflation and rising interest rates will reduce consumer enthusiasm for electric vehicles.

Jeffrey Osborne, an analyst at Cowen, said: “We think the company’s market share has peaked and there are concerns about the company’s overreliance on China for profits and closures. factories are weighing on stocks. Tesla “seems to have cleared the backlog as they are using promotions to ship cars and delivery times are 1-2 weeks in most of the world.”

Wall Street analysts began warning about electric vehicle demand earlier this month, with Tesla’s 12-month average price target down 10% since late November, meanwhile, earnings estimates are The adjusted average for 2022 is down more than 4% from just three months ago.

Tesla has now seen nearly $700 billion in shareholder value evaporate this year. The collapse is one of the biggest causes of the S&P 500’s decline in 2022, after Inc., Microsoft Corp. and Apple Inc.

Still, analysts’ overall view of Tesla remains bullish, with buy-in or parity ratings the highest since early 2015.

“Despite the stock’s performance, Tesla’s innovation curve appears to be accelerating, in stark contrast to the big tech companies,” Canaccord Genuity analyst George Gianarikas wrote in a note last week. where incremental product updates appear to be the most sluggish.” He added that the “green shoots” of the recovery could emerge in 2023.

(Update on stock move, add Jefferies comment in eighth paragraph.)

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