Tesla Inc. has gone from Wall Street’s hottest trade to most hated in a matter of months. Compounding the stock’s woes this week, a rival out of China has one-upped the company on what’s supposed to be Elon Musk’s forte: EV innovation.
Shares of Tesla tumbled 5.3 per cent Tuesday, while BYD Co. shot to an all-time high after unveiling an electric car that can be charged as quickly as a gas vehicle is refueled.
It’s the latest blow for Tesla where a sky-high valuation is pinned on the company’s ability to constantly innovate and stay ahead of rivals. Sentiment was already souring over the past month on reports that sales of its electric cars have plunged in key markets. And Musk’s rising political prominence — that late last year was widely expected to provide a boost to Tesla’s business — has instead become a problem for shares.
“It appears that Tesla is losing its competitive edge on its core competency, as many peers are quickly encroaching on their space,” said David Wagner, portfolio manager at Aptus Capital Advisors.
Tesla’s stock is currently the worst performing on the S&P 500 Index for the year, down more than 44 per cent since the end of December. And BYD’s rapid advances are amplifying investors’ concerns.
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“Range-anxiety and long charging times are among the top hurdles for EV purchases,” said Thomas Thornton, founder of Hedge Fund Telemetry. “Any time a company solves a problem as big as this for the EV industry, it will be a game changer.”
Sluggish Sales
With sales around the globe — including in China, Europe and Australia — suffering, several analysts have cut their price targets as they lowered their revenue, delivery and profit estimates on the company.
Just this week, at least two analysts dialed back expectations. RBC Capital Markets’ Tom Narayan slashed his price target to US$320 from $440 amid expectations the pricing for Tesla’s so-called Full Self Driving software will be lower than previously expected. He also expects the company to command a smaller market share in China and Europe than previously estimated. However, Narayan maintained his buy-equivalent rating on the stock.
Meanwhile, Musk’s waning popularity — even among his diehard base — hasn’t helped. To some on Wall Street, Musk’s willingness to insert himself in political controversies both in the US and in Europe have hurt the brand, and also raised concerns that his focus has shifted away from running the car company.
Oppenheimer analyst Colin Rusch, who rates the stock market perform, struck a cautious note, saying investors are now fully aware of the consumer backlash on Musk’s political activities and sales expectations for 2025 are thus declining. The next leg of the company’s growth will depend on whether it can replace a portion of its consumer base with more conservative buyers, while progressing on key its self-driving and artificial intelligence goals, the analyst said.
However, “datapoints on both variables are mixed and we maintain our negative bias near term,” the analyst added.
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Esha Dey, Bloomberg News
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