Shares of Elon Musk’s electric-vehicle giant have dropped 26% this month, wiping out $205 billion in market valuation. The stock is on pace to close lower for the sixth straight week, its longest losing streak since 2016. For perspective, at that point Tesla hadn’t even launched its first mass-market car, the Model 3.
“There’s no floor in this stock in the near term,” Adam Sarhan, founder and CEO of 50 Park Investments, said in an interview. “Investors are scratching their heads. If Tesla is lowering its forecast and is not bullish on the near term, why should investors be bullish.”
There are plenty of reasons for the selloff. The auto industry is warning about plunging demand for EVs. Hertz Global Holding Inc., the rental-car behemoth, pulled back from plans to expand its electric vehicle fleet, and Ford Motor Co. said it was seeing a weaker market for them.
Meanwhile, Tesla instituted multiple price cuts, sparking worries about thinning margins. Then came Wednesday’s fourth-quarter earnings report, when the company said it expected to expand at a “notably lower” rate in 2024, but did not given any further details. The stock tanked on the news.
Bulls bail
Since then, at least two analysts have downgraded the stock, while several have cut their price targets on the stock. The average price target on Tesla has fallen by nearly 8% since Tuesday’s close, according to data compiled by Bloomberg, and now sits at $220.34. The shares are trading at around $185.
Long-time bullish Tesla analyst, Wedbush’s Daniel Ives, removed the stock from his “Best Ideas List,” saying the lack of details on price cuts, outlook, demand from the company is “a bitter pill to swallow for the bulls.” Ives still has a buy equivalent rating on the stock, but has also lowered his price target.
The stock could stay in flux for a while, considering Tesla’s reluctance to lay out a roadmap and an EV winter that’s expected to plague the entire industry this year.
“Tesla’s December results and outlook effectively pushed back the positive inflection point in the business by a year,” said Gene Munster of Deepwater Asset Management. “Now it looks to be the second half of 2025 before revenue growth will accelerate. In the near-term, shares will likely drift lower in what will be a vacuum of good news.”
Still, for a stock that can move vigorously in either direction once sentiment shifts, this month’s sharp dive also could open the doors to a quick bounce back. Technical signals suggest the stock has dropped into “oversold” territory, which typically signals a coming reversal.
The violent drop “in less than one month has taken it to the kind of oversold level that has only been exceeded once since it went public,” Matt Maley, chief market strategist at Miller Tabak + Co., wrote in a note on Friday. “This stock might have further to fall before it reaches its ultimate bottom, but the odds that it will see a bounce over the near-term are getting quite high.”
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