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How valuable is Tesla after the worst year-to-date record 65% drop ever on the stock market?



Tesla Shares of Inc. has fallen so far, so fast that some individual investors piled up insaw an opportunity to buy what was once Wall Street’s highest-flying stock on the cheap.

But bargain hunters may want to take a closer look.

Even after this year’s record 65% drop, the electric carmaker’s massive surge in 2020 and 2021 has left it with a stock market value of $389 billion, more than Toyota car company, common engine company, Stellantis NV and Ford Motor Combined company.

And the stock still trades at a premium — relative to earnings expectations — than most of the major tech giants, indicating anticipation that the company will see an uptick. tremendous growth that CEO Elon Musk has promised and dominate the industry in the coming years.

In the short term, however, the company is facing growing challenges, including rising costs, competitive threats and the risk that an economic downturn will dampen demand. At the same time, Musk was distracted by the takeover Twittera trade that affected the stock due to speculation that he might sell more Tesla stock to keep the losing social media company alive and take his eyes off of running the automaker.

“Tesla is valued for perfection — and perfection is hard to come by,” said Catherine Faddis, senior portfolio manager at Fernwood Investment Management. “People are wondering exactly why does it have to trade at such a high premium?”

Such concerns fueled a massive sell-off in Tesla that sent the stock down more than 36% in December, its steepest monthly drop since its initial public offering in 2010. That bring a good fortune to short sellers who bet on the stock following a two-year rally that pushed it to 1,163% by the end of 2021.

Electric vehicles are still expected to be the future of the global automotive industry. But Tesla’s short-term outlook has been clouded by the trajectory of the economy and factors such as rising costs of raw materials used in batteries. That led Tesla to price increase this year just as consumers are facing rapid inflation and high interest rates. To clear its inventory, Tesla offered a rare product $7,500 discount for customers who took delivery at the end of the year, effectively matching a potential federal grant starting in 2023.

The company is also facing a growing competitive threat from major automakers that are expected to flood the market with a slew of new electric vehicles over the next few years.

Even so, the stock market is pricing that Tesla will continue its rapid growth, and brokerage analysts are generally more positive about the company than they were a year ago, when 29% of them advised selling. shares when it holds more than $350, according to data compiled by Bloomberg. Only 11% are doing so now as it drops to around $123.

Tesla stock is trading at 24 times the company’s estimated earnings for the next 12 months, with GM and Ford swinging between 5 and 6. That reflects Tesla’s sales. How much faster is expected to grow in the coming years: While GM and Ford’s 2023 sales are expected to expand in the low single digits, analysts find Tesla records received a growth of 36%.

However, concerns that the company may be struggling with faltering demand have increased in recent weeks, in the wake of year-end price cuts and production halts at its factory. they are in China.

“There is a risk to both price and volume” for Tesla, said Ivana Delevska, chief investment officer at SPEAR Invest. “Analysts are estimating volume growth of 50%, which is an increase in an environment where affordability is the focus of consumers.”

As Tesla slipped recently, some analysts withdrew their 12-month price targets, dropping the 13% average to $247. Morgan Stanley Analyst Adam Jonas was among them, slashing his call to $250 from $330.

However, like those who bought into the recent drop, Jonas remains bullish on the stock and maintains his overweight rating. His target implies the stock price could more than double by 2023.

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