The biggest EV maker in the world, Tesla (TSLA.O) saw a bad day in the stock market after its shares plummeted by more than 12% on Thursday which erased $80 billion valuation in the market amid Musk warning over slow sales growth this year.
Despite the heavy price cuts on Tesla models, hurting the margins of the world’s most valuable EV maker, these warnings show investors concerns about Chinese competition and soft demand.
Musk on Wednesday announced that the sales growth would remain markedly lower in 2024, as Tesla is working on a cheaper, next-generation EV to be made at its Texas plant by mid of 2025, which might spark a boom in vehicle deliveries.
However, he noted that it would be a tough job to jack up the production of the new model in such little time, as it would involve high-cut technologies.
Analysts at TD Cowen noted that the fourth quarter revenue and profit were below the market expectations. They viewed that Tesla has essentially gone from bad to worse.”
ALSO READ: Microsoft replaces Apple as world’s most valuable company
The Woes of EV Industry
The EV sector has been facing a bitter slowdown in demand for more than a year now, and the recent price cuts imposed by Tesla has further worsened the pressure on Startups and other automakers such as Ford (F.N).
The impact has started to show up on the world’s most valuable automaker, as Tesla suffered its sharpest intraday decline on Thursday in more than a year, with $80 billion of valuation erased after Musk issues warning over sales growth.
Shares of other EV makers also witnessed a blow out, with Lucid group (LCID.O), Rivian Automotive Inc (RIVN.O) and Fisker (FSR.N) going down by nearly 4.7% to 8.8%.
Michael Hewson, chief market analyst at CMC Markets. “The major problem Tesla faces if any significant attempt to boost sales from here on will probably need to be achieved at the cost of further falls in margin, as it is competing with BYD in China, as well as increased competition elsewhere.”
DONT FORGET: US bitcoin ETF brings $4.6 billion in volume
In the stock markets
At least nine brokerages lowered the status of the stock, while the other seven did the opposite. Having a hold rating with a median price target of $225, which is 23% higher than the closing price of $182.63 per share.
According to Ortex, a data and analytics firm, the short sellers have enjoyed shorting Tesla, making them more than $3.45 billion so far this year making it the most profitable short trade in the United States.
Despite seeing a massive dip in its stock value over the past couple of months, it is still trading at nearly 60 times of its earnings estimates. This gives it a premium valuation over other “magnificent seven stocks” of the US stock market – a group that includes Apple, Nvidia and Microsoft.
Some analysts say that it may become tough for Tesla to justify this high valuation in the coming days, which will put pressure on its share price.
