Just a month into 2024, Tesla (NASDAQ:TSLA) has seen a significant drop in its market value, shedding roughly a quarter of its capitalization. Among the S&P 500 constituents, Tesla’s stock performance stands as one of the weakest year-to-date. The roller-coaster journey of the Elon Musk-led company has presented opportunities for both bullish and bearish investors over recent years.
In 2022, Tesla shares plummeted by two-thirds, yielding hefty profits for those betting against the electric vehicle (EV) titan. However, this narrative flipped in 2023, catching out many persistent short sellers as Tesla’s stock more than doubled.
The start of 2024 has been bleak for Tesla, with bears sensing an opportunity in what they perceive as an “overvalued automaker.”
Why Is Tesla Stock Declining in 2024?
Tesla’s woes in 2024 span various fronts, from macroeconomic factors to internal company dynamics, and notably, leadership challenges. At the outset of the year, Tesla reignited an electric vehicle price war, this time by slashing prices in China. These cuts exacerbated sell-offs in Chinese EV companies like NIO (NYSE:NIO), Xpeng Motors (NYSE:XPEV), and Li Auto (NYSE:LI).
Furthermore, Tesla’s fourth-quarter earnings failed to impress investors. While a minor earnings miss might have been forgiven, the company’s outlook for 2024 deliveries, hinting at potential significant declines compared to 2023, rattled investor confidence.
A considerable portion of Tesla’s previous rally was underpinned by Elon Musk’s bold proclamation in early 2021 of a 50% long-term delivery Compound Annual Growth Rate (CAGR). However, 2024 might mark the third consecutive year of deliveries falling substantially short of this target.
With the Cybertruck still distant from mass production and a new low-cost model yet to be unveiled, Tesla lacks immediate growth catalysts. Moreover, the macroeconomic climate, especially the slowdown in China, Tesla’s largest overseas market, appears to be worsening by the day. Overall, sentiment toward EV stocks has cooled off as demand growth hasn’t met earlier optimistic projections.
Impact of Elon Musk’s Controversies on TSLA Stock
Controversies surrounding Elon Musk have added to Tesla’s woes. Musk’s threats to develop artificial intelligence products elsewhere unless he gains more control over Tesla face a setback following a Delaware court’s nullification of his massive $56 billion compensation plan.
Allegations of Musk’s drug use, as reported by The Wall Street Journal, have also raised concerns. Some Tesla board members reportedly felt pressured to partake in drug use with Musk, fearing repercussions from the CEO.
Tesla’s corporate governance has long been under scrutiny, exemplified by the recent voiding of Musk’s compensation package by a Delaware judge, questioning the board’s independence and the negotiation process leading to the approval of the hefty pay package.
Tesla Stock Forecast: Analyst Sentiments Shift
While some market segments, including longstanding Tesla bulls like Cathie Wood’s ARK Invest, remain optimistic about Tesla’s prospects, recent events have made even former bulls cautious. Daiwa downgraded Tesla shares from “outperform” to “neutral,” citing concerns about corporate governance among other factors. Notably, key Tesla shareholder Ross Gerber believes Musk’s behavior is negatively impacting the stock.
Piper Sandler, maintaining an “overweight” rating on Tesla, revised its target price downward by $70 to $225. Even Gene Munster of Deepwater Asset Management, far from being a Tesla bear, sounded a note of caution following the company’s disappointing 2024 outlook.
Tesla now holds a consensus rating of “Hold” from analysts, a shift from the “Moderate Buy” rating observed just a month prior. Despite this, the stock’s mean target price of $221.31 remains nearly 20% higher than its recent close.
Can TSLA Stock Recover in 2024?
Tesla has weathered severe storms in the past and eventually bounced back. However, the company faces numerous uncertainties and unknowns in the near term, clouding the short-term outlook.
For believers in Musk and the Tesla narrative, the current downturn may present an opportunity to reinforce their convictions. Tesla remains one of the most influential companies of our era, with a presence in multiple dynamic industries like electric vehicles, renewable energy, autonomous driving, robotics, and supercomputing.
Yet, for bears, Tesla’s premium valuations compared to traditional automakers might continue to pose a barrier to entry, regardless of the price point.
Featured Image: Unsplash
