NEW YORK (BLOOMBERG) - Tesla shares slid on Tuesday (May 24) as the electric-vehicle maker's production woes in China refuse to go away, leading an analyst to slash his 12-month price target on the once high-flying stock.
"With about 13,000 units of production per week and higher than average margins, any production loss at Shanghai is bound to have a significant impact on margins and earnings," said Daiwa analyst Jairam Nathan, who cut his price target to US$800 (S$1,100) from US$1,150.
Until recently, Tesla was considered the ultimate growth stock, rising 50 per cent last year and closing at US$1,145 on April 4, when chief executive officer Elon Musk announced his 9.2 per cent stake in Twitter.
Since then, Mr Musk has been engaged in a highly public attempt to buy the social media platform. And Tesla's stock has been in a freefall, sinking to US$620.57 at its lowest on Tuesday and wiping out almost half its market capitalisation after touching a record high last November.
Since Mr Musk revealed his Twitter stake, Tesla shares have plunged 42 per cent compared with a 13 per cent decline in the S&P 500 Index and a 26 per cent drop in the S&P 500 consumer discretionary sector. It is the seventh-worst performing stock in the S&P 500 over that time and the third-biggest drag in terms of index points.
Tesla also has dramatically underperformed most of the market's other major tech growth stocks since April 4, including Facebook parent Meta Platforms, Apple, Amazon.com and Google parent Alphabet. Streaming service Netflix is the only FAANG name to be putting up a worse performance than Tesla since the news broke of Mr Musk's Twitter position.
All of this helps explain why Mr Musk's highly public back-and-forth with Twitter has captivated markets, particularly as he sold US$8.5 billion of Tesla stock to pay for the buyout.
Beyond the Twitter distraction, Tesla's key Shanghai factory has faced disruptions due to long-running Covid-19 lockdowns in the city.
The company also was dropped from the environmental, social, and governance version of the S&P 500 earlier this month, a move that could lead to some forced selling by funds benchmarked to that gauge. The company has also dealt with the supply shortages and surging raw material costs that other automakers face.
The broader market environment has turned against highly valued growth companies, with the Federal Reserve raising interest rates to tame inflation. Goldman Sachs on Monday said hedge funds continue to reduce exposure to growth stocks, incrementally rotating away from Apple, Amazon and Tesla.
"Tesla is a high-growth company, so the majority of its valuation is driven by future growth expectations," said Mr Seth Goldstein, equity strategist at Morningstar Research Services. "Even small changes in future growth assumptions can have a large impact on the stock's valuation."
Tesla shares closed down 6.9 per cent to US$628.16 on Tuesday, sending the fortune of Mr Musk, the world's richest person, down by 5.4 per cent to US$192.7 billion.
While Mr Musk's wealth is the lowest it has been since Aug 26, the Tesla co-founder is still easily the richest of the handful of people worth at least US$100 billion, according to the Bloomberg Billionaires Index. Amazon.com's Jeff Bezos is second at US$127.8 billion.
Mr Musk, 50, last dipped below the US$200 billion threshold in March. But markets promptly staged a rally, lifting his net worth to US$288 billion on April 4, the same day that Mr Musk disclosed he had acquired about 9 per cent of Twitter.