NEW YORK - The tailspin in Tesla shares accelerated on Tuesday, marking their longest losing streak since 2018, as a report of a plan to temporarily halt production at the electric vehicle (EV) maker’s China factory rekindled fears about demand risks.
Shares of the company, led by billionaire Elon Musk, closed down 11 per cent at US$109.10, for the seventh straight decline and its steepest one-day drop since April.
Tesla’s market valuation has shrunk to roughly US$345 billion (S$465 billion) – below that of Walmart, JPMorgan Chase & Co and Nvidia. This latest sell-off also cost the firm its position among the 10 highest-valued companies on the S&P 500 index, a distinction it had held since joining the benchmark in December 2020.
Tesla has now seen around US$720 billion of shareholder value evaporate in 2022. The collapse is among the biggest contributors to the S&P 500’s decline in 2022, after Amazon.com, Microsoft and Apple.
News of reduced output in Shanghai comes on the heels of last week’s report that Tesla was offering US consumers a US$7,500 discount to take delivery of its two highest-volume models before the year end, intensifying concerns that demand is ebbing.
For Tesla, whose valuation is pinned on its future growth prospects, these worries reflect a significant risk.
“Most of the stock’s weakness this year is due to indicators showing flagging demand globally,” said Mr Craig Irwin, a senior research analyst at Roth Capital Partners.
Tesla’s estimated revenue growth is “still amazing, but not US$385 billion market valuation-type amazing”, he added, referring to the value at the end of last week.
On average, analysts expect revenue to grow by 54 per cent in 2022 and 37 per cent in 2023, shows data compiled by Bloomberg.
The hope that Tesla will be the leading EV company in a future dominated by electric cars drove a spectacular eightfold rally in its shares in 2020, earning its place in the S&P 500 and at one point, making it the fifth-most valuable stock in the gauge.
But in 2022, the unwinding has come equally fast. Tesla shares have lost 69 per cent of their value amid Mr Musk’s Twitter takeover and related distractions, investor jitters about growth assets, and most recently, worries that high inflation and rising interest rates will dampen consumers’ enthusiasm for EVs.
Mr Jeffrey Osborne, a senior research analyst at Cowen, said: “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.”
Tesla appears to have burned through its backlog as it is resorting to promotions to move cars and delivery lead times are one to two weeks in the majority of the world, he added.
Wall Street analysts started flagging warnings about EV demand earlier in December, with the average 12-month price target for Tesla falling 10 per cent since the end of November. Meanwhile, the average adjusted earnings estimate for 2022 has declined over 4 per cent from just three months ago.
Still, analysts’ overall stance on Tesla remains bullish, with the highest share of buy or equivalent ratings since early 2015.
Canaccord Genuity senior analyst George Gianarikas wrote in a note last week: “Despite the stock’s performance, Tesla’s innovation curve appears to be accelerating, a stark contrast to other large tech companies whose incremental product updates appear stagnant at best.”
He added that “green shoots” of recovery may appear in 2023. BLOOMBERG
