Investors appear to be reconsidering the high share price as other automakers offer more electric vehicles.
Tesla now has a market value of about $575 billion, still far richer than any other automaker. The valuation reflects the belief among many investors that Tesla is revolutionizing the auto and energy industries, and will eventually deal fatal blows to older and more established companies.
“Tesla was a cult stock for so long — and able to be that way in a market that was irrational,” said Vicki Bryan, chief executive of the research firm Bond Angle. “But reality hits the road. That’s where we’re at.”
The China Passenger Car Association said Tesla sold 15,484 locally made cars in January. That was higher than a year earlier but lower than December’s total of 23,804. Tesla’s sales in China often fluctuate when the company exports batches of cars made at a Shanghai plant to Australia, Europe and elsewhere.
“Tesla has really benefited from that halo of ‘It doesn’t really matter how many vehicles we sell this year or how much cash we burn,’” said David Whiston, a Morningstar analyst. “It’s all been ‘Where are we going to be five or 10 years from now?’ But lately there’s been a bit more turbulence.”
Mr. Whiston added that Tesla share price was incredibly volatile and that it could be hard to deduce clear trends. “The way it fluctuates, I wouldn’t be surprised if it’s back above $700 next week,” he said.
Institutional investors may have been selling some of their stakes in Tesla this year, but the regulatory forms that would reveal such sales won’t come out for weeks. Some big shareholders slashed their Tesla holdings last year. Baillie Gifford, a Scottish investment manager and a longtime Tesla shareholder, cut its position to just over 27 million shares at the end of last year, down from nearly 59 million at the end of June.
As Tesla’s stock soared, starting in late 2019, short sellers would have lost billions of dollars on their bets, perhaps scaring some of them away from Tesla, which has gained wide popularity among individual investors, many of whom revere its chief executive, Elon Musk. In the middle of February, nearly 48 million Tesla shares had been sold short, according to the Nasdaq stock exchange, down from nearly 61 million at the end of 2020.
Short sellers lost nearly $41 billion on their Tesla bets last year, but the decline of the stock from its high has given them profits of nearly $14 billion, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, a market data firm.
The competitive threats to Tesla are growing. The Mustang Mach E, an electric sport utility vehicle styled to resemble Ford’s sports car, has earned favorable reviews. Some auto critics and enthusiasts have said they like it more than Tesla’s Model Y, which is remarkable because many of the same people previously regarded Ford as an electric-car laggard.
“I still love the Model X. In terms of performance, you want a thrill,” he said. “But you have to accept that it has a lot of imperfections. The Mach E is definitely built with quality, and it’s cool. You can’t help but look when it drives by.”
The company, which did not respond to a request for comment, has come a long way from the dark days of 2018 and 2019, when some analysts wondered if it would survive as an independent business. Mr. Musk was struggling with increasing the production of Tesla’s most affordable car, the Model 3, and described the company’s problems as “manufacturing hell.”
Despite the recent drop, Tesla’s stock price is still up over 300 percent over the past 12 months. And its market value is more than the combined market capitalization of Toyota Motor, Volkswagen, Daimler, G.M. and Ford — companies that sell many more cars than Tesla.
Of course, any time a company is valued at many times its peers, it can be vulnerable to a sell-off if investors begin to have even small doubts. Even after the stock plunged from its high, Wall Street is extremely optimistic about Tesla. The stock trades at 144 times the profit that analysts expect the company to earn this year, a stratospheric valuation. Much hope in the market is placed on Tesla’s having a big slice of a much larger market for electric vehicles, which is why analysts expect the company’s profits to more than double by the end of 2025.
Investors who believed such forecasts helped pushed the stock up after late 2019, which drew in other investors. “As long as money is flooding in, you can make anything a self-fulfilling prophecy,” Ms. Bryan of Bond Angle said.
Source: New York Times