When stock Tesla, the electric car maker, was added to one of the world’s most important stock indices in January, some analysts said the company’s shares may not jump up and down to erroneous and could behave more like those at blue-chip. companies.
Investors had other opinions.
After months of bidding up Tesla stock, helping it enter the S&P 500 index, they have been selling wildly for the past few weeks. More than $ 270 billion has been written off the market value of Tesla stock since its share price peaked in January.
The price fell more than 10 percent Friday morning before recovering most of the loss and the day closed down 3.8 percent to $ 597. The losses are steady from a few weeks ago, when shares traded short at $ 900, having wiped out a third of Tesla’s market value amid concerns about signaling sales and competition from other manufacturers that are finally selling electric vehicles that many people want to buy .
Many investors have also withdrawn from more risky stocks and investments in anticipation of rising interest rates.
Tesla now has a market value of $ 575 billion, still far richer than any other automaker. The valuation reflects the belief among many investors that Tesla is transforming the automotive and energy industries and will eventually deal fatal blows to older and more established companies.
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“Tesla has been a cult stock for so long – and capable of being so in a reckless market,” said Vicki Bryan, chief executive of Bond Angle research firm. “But reality is hitting the road. That’s where we are. ”
Analysts and sales data have suggested that Tesla is becoming less dominant in the U.S. and Chinese electric car markets. Tesla lost market share last month in the United States to Mustang Mach E new Ford Motor electric, analysts at Morgan Stanley said Wednesday.
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 23,804 in December. Tesla’s sales in China often change as the company exports batches of cars made at a base in Shanghai to Australia, Europe and elsewhere.
“Tesla has benefited greatly from that position,“ It doesn’t matter how many vehicles we sell this year or how much money we burn, ”said Morningstar analyst David Whiston. “It’s all been, ‘Where will we be five or 10 years from now?’ But lately there has been a bit more temptation. ”
Whiston said Tesla’s share price was highly volatile and it could be difficult to reduce clear movements. “As it changes, I wouldn’t be surprised if it’s back above $ 700 next week,” he said.
Institutional investors may have been selling off some of their bets at Tesla this year, but the regulatory forms will not reveal such sell-offs for weeks. Some major shareholders seized Tesla last year. Baillie Gifford, a Scottish investment manager and long-term 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.
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Tesla has long been a favorite target of investors aiming to profit from a decline in stock prices. Called short sellers, they borrow shares and sell them, hoping to buy them back in the future at a lower price. If successful, short sellers can make the difference between selling and pocket buying prices, but the trades can go awry if the stock price rises a lot. That happened to some investors who bet against the shares of GameStop, the video game vendor.
As Tesla stock rose, starting at the end of 2019, short sellers would have lost billions of dollars on their bets, possibly scaring some away from Tesla, which has become popular. great among individual investors, many of whom pay homage to its leader, Elon Musk. In mid-February, nearly 48 million Tesla shares were 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 stock’s decline from the high has given them profits of nearly $ 14 billion, according to Ihor Dusaniwsky, managing director of forecast analysis at S3 Partners, a market data company.
The competitive risks to Tesla are growing. The Mustang Mach E, an electric SUV that resembles a Ford sports car, has garnered favorable reviews. Some automotive and enthusiastic critics have said they like it more than Tesla’s Model Y, which is surprising given that many of the same people saw Ford as a car laggard. -electronics.
Sergio Rodriguez, a consultant from St. Marys, Georgia, which owns Tesla Model X, Mach E nationwide. Rodriguez said he planned to keep his Model X, despite some poor quality issues and slow responses with Tesla which he described in YouTube videos and on electric vehicle websites.
“I still like Model X. In terms of performance, you want fun,” he said. “But you have to accept that there are a lot of differences. The Mach E is definitely built with quality, and it’s cool. You can’t help but watch as it passes. ”
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Last month, Ford sold 3,739 Mach Es, a small number compared to the tens of thousands of construction trucks the company sells each month but with respect for an electric car. This month, Volkswagen plans to start delivering its electric SUV, the ID.4, in the United States. General Motors recently renewed their electric contract, the Chevrolet Bolt, and introduced a larger and higher-end version of the car.
Whatever the competition brings, Tesla has enough cash on hand to fund its activities for some time. It took advantage of its high price last year by selling over $ 12 billion of new stock to investors and had more than $ 19 billion in cash by the end of 2020. Tesla spent $ 1.5 billion on Bitcoin early this year, and even if the company makes a big loss on that bet, there will still be a lot of money on hand.
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 questioned whether it would survive as an independent business. Musk struggled to increase the productivity of Tesla’s most affordable car, the Model 3, and described the company’s problems as “hell manufacturing.”
Despite the recent fall, Tesla’s stock price is still up more than 300 percent over the past 12 months. And its market value is greater than the total market capitalization of Toyota Motor, Volkswagen, Daimler, GM and Ford – companies that sell far more cars than Tesla.
In fact, whenever a company is valued far beyond its peers, it can be vulnerable to sale if investments start to cause even slight doubts. Even after the stock fell from its peak, Wall Street is very optimistic about Tesla. The stock trades at 144 times the profit analysts expect the company to earn this year, a stratospheric valuation. There is a lot of hope in the market for Tesla to get a large chunk of the 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 thought such a prediction was pushing the stock up after the end of 2019, helped attract other investors. “As long as money is flowing in, you can turn anything into a self-fulfilling prophecy,” said Bryan of Angle Bond.