After a dark 2022, Tesla’s stock price took a bum at the start of the new year.
The market value has shrunk by one tweet
On the first trading day of 2023, Tesla closed down 12%, and its market value shrank by US$47 billion in one day, more than the US$44 billion that Elon Musk acquired on Twitter. Now Tesla’s price-to-earnings ratio is only 20 times, which is the lowest point since the stock went public.
Although Elon Musk remained optimistic on Twitter, “The long-term fundamentals are very strong, but the short-term market madness is unpredictable.” But the reality is undoubtedly cruel. Tesla, the leading electric car stock whose stock price has skyrocketed in the past two years, has apparently gradually returned to the ground.
Tesla’s stock price has plummeted by 70% in the past year, and its current market value is only 400 billion U.S. dollars (as of Wednesday’s close, U.S. time), which is far from the peak of 1.2 trillion U.S. dollars. Meanwhile, the Nasdaq Composite is down 33% in 2022, while the S&P 500 is down just 18%.
Tesla’s quarterly delivery figures miss expectations
The bearish factor this time is Tesla’s delivery data released on Monday. Tesla delivered 405,000 vehicles in the fourth quarter of last year, below the 420,000 expected by analysts. Tesla’s total delivery volume last year was 1.3 million vehicles, a year-on-year increase of 40%, neither completing the previously set growth target of 50%, nor lower than analysts’ lowered expectations. At the end of October last year, Tesla had hinted that it might not be able to meet its target of a 50% year-on-year increase in annual deliveries, and analysts have also lowered Tesla’s delivery forecasts.
Wedbush analyst Daniel Ives (Daniel Ives) believes that considering that the economic environment is not optimistic, Tesla’s fourth-quarter deliveries are already reasonable, “We think this is already a pretty good performance.” But the market is clearly not I do not think so. “Tesla’s 2023 opening is inauspicious as investors sell off amid disappointing delivery figures,” Aves wrote.
Deliveries fell short of market expectations
Tesla produced a total of 440,000 vehicles in the fourth quarter, 34,000 more than deliveries. This suggests that last year’s miss in deliveries was not a problem of weak capacity in the past few years. Moreover, Tesla, like other car companies, has obvious inventory problems.
Tesla also faces inventory problems
Starting in the second quarter of last year, Tesla’s inventory began to grow significantly, and by the end of last year it had exceeded 60,000 vehicles, which had never been seen before. In the past high-speed growth period, Tesla, which had no intermediate sellers, was always in short supply, and its inventory remained at an extremely low level of less than 20,000 or even thousands of vehicles.
At the end of last year, Tesla offered an unprecedented $7,500 discount in the U.S. market, and cut prices by 5,000 Canadian dollars in Canada and 75,000 Mexican pesos in Mexico. In the Chinese market, Tesla has also cut prices.
In order to beat the delivery volume, Elon Musk also sent an email asking employees to voluntarily give up their vacations and strive to complete the delivery volume at the last moment. But even so, Tesla still has not completed the previously set goal of a 50% increase in deliveries.
Although Tesla’s 40% growth in deliveries in 2022 is far above the standards of the auto industry, it is undeniable that Tesla’s growth rate has slowed down significantly and is lower than analysts’ expectations. What kind of competitive advantage and growth momentum can be maintained is what worries investors.
Assets shrunk by $200 billion
From 2019 to 2021, Tesla’s stock price soared like a rocket, and its market value soared from $45 billion to a peak of $1.2 trillion. As waves of incentive options were cashed out, Elon Musk’s personal assets have also ballooned from US$20 billion in 2019 to US$340 billion by the end of 2021, setting a record for the personal assets of the world’s super rich.
However, as Tesla’s stock price has plummeted by 70% in the past year, Elon Musk’s personal assets have also shrunk by more than 200 billion US dollars from the peak period at the end of 2021, which also set a record for the shrinking assets of the super rich. The position of the world’s richest man is no longer Elon Musk, but Bernard Arnault, chairman and CEO of luxury goods giant LVMH.
Arnold’s personal assets are close to $170 billion, while Elon Musk’s is only $130 billion. In the past year, although the global stock market has fallen sharply and the share price of technology giants has shrunk severely, the share price of luxury goods giant LVMH has only fallen by 2.5%. The current market value is as high as 389 billion U.S. dollars, higher than Tesla.
Of course, Elon Musk himself plays an important role behind Tesla’s sharp drop in 2022. After acquiring Twitter, he focused on massive layoffs and business turnaround plans and had no time to take care of Tesla’s daily operations. Many controversial words and deeds were involved in political struggles. When Tesla’s stock price continued to fall, he continued to sell 390% of the cash in a year. billions of dollars, which made Tesla investors very dissatisfied.
But this time, investors are more worried about Tesla’s fundamentals. Last year’s delivery volume did not meet expectations. Can Tesla continue its growth momentum in 2023? On January 25, Tesla will release its 2022 financial report, at which time investors will be able to have a clearer understanding of Tesla’s operating conditions and have a more accurate prediction of its performance prospects in 2023.
Wall Street cuts forecasts
Brokerage analysts such as Goldman Sachs and Morgan Stanley have lowered Tesla’s target stock price. Wall Street’s average target stock price for Tesla is now $233, which is about $60 lower than a few weeks ago. Analysts have a Buy rating of 64% on Tesla, slightly higher than the S&P 500 average of 58%.
Just a few months ago, Wall Street analysts expected Tesla to earn $6 per share in 2023. But few analysts now believe Tesla will be able to finish earning $5.43 per share by 2023.
Wedbush analyst Elvis believes that Tesla’s US stock earnings this year may be around $5. Even if the earnings per share are calculated at $5, the price-earnings ratio of Tesla’s stock price is only 21-22 times. This price-earnings ratio is not high among technology companies. Aves has a $175 price target for Tesla.
Morgan Stanley analyst cuts Tesla earnings forecast
Still more analysts gave lower expectations. Morgan Stanley analyst Adam Jonas, who has been staunchly bullish for the past few years, is now offering his most cautious forecast. He even expects Tesla’s profit to decline in 2023, from $3.99 per share at the end of last year to $3.77.
What cannot be ignored is that the prospect of an economic slowdown has contributed to a slowdown in consumer demand. Elon Musk also accused the central bank last month of raising interest rates for hurting consumer demand for cars. He has also repeatedly emphasized on different occasions that the U.S. economy is about to fall into recession, and the decline may be more severe than in 2009. Under the psychological expectation of economic recession, consumers tighten their spending, and automobiles will be the most influential consumer spending.
In such an expected environment, Wall Street analysts are also cautious about Tesla’s 2023 deliveries. Deutsche Bank lowered Tesla’s 2023 delivery forecast to 1.84 million vehicles, equivalent to a 40% year-on-year increase. And Goldman Sachs even lowered it to 1.8 million.
facing many disadvantages
Independent analyst Matthias Schmidt believes that 2023 will undoubtedly be a year to test the true level. Every electric car company must rely more on its own strength, and Tesla will feel this. Tesla shareholders may be in for more disappointing indicators this year.
In Schmidt’s view, Tesla will face several major headwinds this year: interest rate hikes by major central banks around the world have led to a surge in interest rates, which means that car loan interest rates have risen sharply, which will dampen consumers’ willingness to buy new cars; Other countries have begun to cut subsidies for the purchase of electric vehicles.
In the $7,500 tax rebate subsidy given by the U.S. federal government this year for the purchase of electric vehicles, the tax rebate pricing threshold for sedans is only $55,000, and the tax rebate pricing threshold for pickup trucks and SUVs is $80,000. Mid-to-high-end models that exceed the price cannot enjoy tax rebate treatment. This means that Tesla’s high-end Model S and X are not eligible for the discount because they are too expensive, and only a few low-end models of the Model Y and Model 3 are eligible for tax rebates. This is a very unfavorable market competition factor for Tesla.
More importantly, major car companies have entered the electric vehicle industry one after another, and consumers have more choices. Now Ford, General Motors, and Volkswagen have launched their own electric vehicles. In the European market, Tesla’s market share has dropped from 33% in 2019 to about 15%.
Of particular concern to Wall Street is Tesla’s growth prospects in China, where BYD has surpassed Tesla’s sales in a highly competitive electric-vehicle market fueled by a strong rise of local brands.
Wedbush analyst Elvis wrote in the investment report, “The Chinese market accounts for more than 40% of Tesla’s global growth, which is a major concern, and Tesla may further cut prices in the next few months. , to boost Tesla’s market demand in China.
Elon Musk is the key factor
However, Elon Musk and Tesla still have many staunch supporters. Morningstar (MorningStar) analyst Seth Goldstein believes that Tesla can still maintain its growth trend, and their annual deliveries will reach 5 million vehicles by 2030.
While Tesla shares have plunged 55% over the past three months, the Ark Innovation Fund has been buying the dip. Due to the sharp drop in Tesla’s stock price, the investment value of Ark Investment has also shrunk by more than 60%, lagging behind the performance of all similar funds.
Just after Tesla fell 12% on Tuesday, Cathie Wood, the “wooden sister” of Ark Investment, is still firmly bullish on Tesla. She said that Tesla’s stock price still has huge room for growth, and believes that the stock price can soar from the current price of above $100 to $1,500 in the next five years.
Wood said that Tesla still has clear advantages over other industry competitors in terms of manufacturing, technology, batteries and materials, and believes that the price of Model 3 can be reduced from the current $45,000 to $25,000 in the next few years. She believes that there are indeed many people who resist buying Tesla because of Elon Musk’s acquisition of Twitter, but as long as Tesla realizes the cost advantage, the price factor will attract more car buyers.
Another factor that makes Wood bullish on Tesla is her belief that Tesla will launch a fully driverless taxi fleet in 2024, taking the lead in this new industry. “The profit margin of the unmanned taxi industry is even as high as 80%, far exceeding the current 25%-30% of car manufacturing, thus increasing Tesla’s profit margin to more than 60%.”
However, the most likely positive factor for Tesla in 2023 may be the return of Elon Musk.
Wedbush analyst Elvis wrote in the research report that Elon Musk and Tesla must now do three things. “First, formulate achievable 2023 performance goals, delivery targets, and stable interest rates; second, stop selling stocks for cash, and make a clear commitment in the next earnings conference call; third, determine the Twitter CEO candidate as soon as possible so that Tesla can get rid of the risk of Elon Elon Elon Musk’s distraction and lack of focus. Although Zhu Xiaotong will obviously take on more responsibilities at Tesla, Elon Musk must personally grasp the business more this year.”
