Tesla witnessed a 7% decline on Thursday as CEO Elon Musk cautioned about slower growth in 2024.
A neon-lit Tesla charging station – illustrative photo. Image credit: Stephen Mease via Unsplash, free license
Despite implementing price cuts that have impacted margins and raised concerns among investors, the world’s most valuable automaker faces challenges in sustaining sales growth.
Musk indicated that growth for the year ahead would be “notably lower.” The focus for Tesla will be on developing a next-generation electric vehicle slated for production at its Texas factory in the latter half of 2025, with expectations that this will drive the next surge in deliveries.
However, Musk’s statements failed to resonate with investors, and Tesla is anticipated to incur a market value loss of about $50 billion if premarket losses persist. The company’s stock had already experienced a 16.4% decrease this month as of the last close.
The electric vehicle (EV) industry has been contending with a demand slowdown for over a year, and the recent price cuts by Tesla are expected to exacerbate the challenges faced by startups and established automakers like Ford.
Some experts say that Tesla’s attempts to boost sales may lead to further declines in operating margin, given the competition with BYD in China and increased competition in other regions.
Despite the challenges, at least 10 brokerages raised their price targets on Tesla, and four revised their outlook, resulting in a median price target of $225—approximately 9% higher than the stock’s last closing price. Notably, Tesla’s stock is currently trading at nearly 60 times its 12-month forward earnings estimates, presenting a more premium valuation compared to other “Magnificent Seven” stocks, including Apple, Microsoft, and Nvidia.
Written by Alius Noreika