The slide in shares of Tesla Inc. accelerated on Tuesday as a report of a plan to temporarily halt production at its factory in China reignited fears over demand risks and sent the stock on its longest dry spell since 2018.
Despite the stock’s performance, Tesla continues to innovate. “…A stark contrast to other big tech companies whose incremental product updates are stagnant at best,” Canaccord Genuity analyst George Gianarikas wrote in a note last week. He added that “green shoots” of the recovery could appear in 2023.
Tesla, Inc. designs, develops, manufactures, leases, and markets electric vehicles, as well as power generation and energy storage systems, in the U.S., China, and internationally.
The expectation that an Elon Musk-led company would emerge as a leading EV company in a future dominated by EVs has driven a remarkable, eight-fold stock rise in 2020, earning its spot on the S&P 500, and making it at one point the fifth-most-valuable stock on the index.
Analysts’ general position on Tesla remains bullish, with the highest stock price having been given a buy or equivalent rating since the beginning of 2015. News of the output cutbacks in Shanghai comes on the heels of reports last week that the company led by Elon Musk is offering U.S. consumers $7,500 discounts for taking delivery of two high-volume models by the end of the year, adding to concerns about declining demand. Analysts, on average, project sales will increase 54% in 2022 and 37% in 2023, according to data compiled by Bloomberg.
“Most of the stock’s weakness this year can be attributed to indicators showing slowing global demand,” said Craig Irwin, an analyst at Roth Capital Partners. Tesla’s estimated sales growth “is still amazing, but not an amazing $385 billion market valuation,” he said, referring to the reading late last week.
“We believe the company’s market share has peaked and concerns about its over-reliance on China for profits and the factory shutdown are weighing on the stock,” said Jeffrey Osborne, an analyst at Cowen. Tesla “seems to have used up its backlog as they resort to promotions to move cars and delivery times are 1-2 weeks in most parts of the world.”
“Our sense is the company’s market share has peaked and concerns about its over-reliance on China for profits and the factory shutdown are weighing on the stock,” said Jeffrey Osborne, an analyst at Cowen. Tesla “appears to have burned through its backlog as they are resorting to promotions to move cars and delivery lead times are 1-2 weeks in the majority of the world.”