On January 25, Tesla’s stock fell more than 12%, Tesla saw its biggest intraday percentage decline in almost a year, wiping nearly $80 billion in market value as CEO Elon Musk alluded to a slowdown in sales this year despite price reductions that have already negatively impacted the company’s margins and heightened investor apprehension over weak demand and Chinese competition, citing a Reuters article. Its monthly market capitalization loss increased to almost $210 billion as a result.
One day before this trading session Elon Musk stated that growth would be “notably lower” since Tesla is concentrating on producing a more affordable, next-generation electric vehicle at its Texas manufacturing in the second half of 2025, which is anticipated to cause the company’s next delivery boom.
As to the report, TD Cowen analysts expressed dissatisfaction at Tesla’s lower-than-expected revenue and earnings for the fourth quarter, telling Reuters that “the headlines have essentially gone from bad to worse.”
Major Reasons for Tesla’s Recent fall in stock price
For more than a year, the electric car market has been experiencing a slowdown in demand. With Tesla’s recent price reductions, it is anticipated that the difficulties experienced by both new and established automakers, such as Ford, will worsen.
According to Michael Hewson, chief market analyst at CMC Markets, “the problem for Tesla is any significant attempt to boost sales from here on will probably need to be achieved at the cost of further falls in operating margin, due to having to compete with BYD in China, as well as increased competition elsewhere,” Reuters reported.
Also Read: Elon Musk’s Starlink will Shortly Launch in India
At least nine brokerages downgraded Tesla, while seven upgraded their recommendations. As of right now, the stock has an average “hold” rating and a median price target of $225, which is 23% higher than Thursday’s closing price of $182.63.
It is the most profitable short trade in the United States this year, with short sellers focusing on Tesla reaping significant returns.
Tesla’s stock, in spite of this, is valued at about sixty times its projected 12-month earnings, which is more than other well-known stocks like Apple, Microsoft, and Nvidia. Experts are worried that Tesla’s growing similarity to a conventional automaker, along with possible flaws in profit margins and sales growth, could put its present premium valuation in trouble.