Tesla Stocks Drop by $80 Billion After Musk's Sales Warning

In a shocking turn of events, Tesla, the electric vehicle industry leader under the guidance of CEO Elon Musk, experienced a dramatic fall in its stock value, shedding a staggering $80 billion in market capitalization. The drop followed a warning from Musk about a potential slowdown in sales growth for the year 2024, coupled with weaker-than-expected quarterly financial results. As Tesla's shares faced their sharpest day trading percentage loss in over a year, concerns arose over the impact on the broader electric vehicle industry and the company's valuation in the face of growing competition.

Quarterly Results Fall Short of Expectations

Shares of Tesla (TSLA) took a significant hit at the opening bell on Thursday, January 25, as the electric vehicle giant delivered weaker-than-expected quarterly financial results and warned investors about a potential slowdown in sales growth for 2024. The announcement by CEO Elon Musk triggered a market sell-off, causing the stock to tumble over 12%.

Elon Musk's Warning on Slower Sales Growth

Focus on Affordable Next-Gen Electric Vehicle

Despite implementing price cuts that have already impacted margins, Elon Musk informed investors on Wednesday that Tesla anticipates a "notably lower" sales growth in the coming year. Musk highlighted the company's strategy to shift its focus to a more affordable next-generation electric vehicle, slated to be produced at the Texas factory in the latter half of 2025. However, he acknowledged the challenges of ramping up production due to the incorporation of cutting-edge technologies.

Tesla's Stock Value Fall by $80 Billion

Tesla's stock witnessed its sharpest Day Trading percentage loss in more than a year, with a staggering $80 billion wiped off its market value on Thursday. This plunge pushed Tesla's total market capitalization loss for the month to approximately $210 billion.

Also Read: Tesla Faces Turbulence as Market Valuation Drops by Over $94 Billion in 2024

Impact on Other EV Makers

Rivian, Lucid, and Fisker Shares Also Slide

The ripple effect of Tesla's downturn extended to other electric vehicle makers, with shares of Rivian Automotive Inc, Lucid Group, and Fisker experiencing declines ranging from 4.7% to 8.8%. The entire EV industry has been grappling with a demand slowdown for over a year, and Tesla's price cuts are expected to intensify the pressure on both startups and established automakers like Ford.

Concerns Over Competition and Operating Margins

Analysts expressed growing concerns over Tesla's ability to boost sales without compromising operating margins, especially in the face of increasing competition, particularly in China. At least nine brokerages downgraded Tesla's stock, while seven raised their ratings. The company currently holds an average "hold" rating with a median price target of $225, which is 23% higher than Thursday's closing price of $182.63.

Tesla Short Sellers Profits Soar

According to data from analytics firm Ortex, Tesla short sellers have already made a remarkable $3.45 billion profit in 2024, making it the most profitable short trade in the U.S. market so far this year.

Valuation Challenges and Analyst Concerns

Tesla's stock currently trades at nearly 60 times its 12-month forward earnings estimates, according to data from LSEG. This premium valuation surpasses other notable stocks in the "Magnificent Seven" group, including Apple, Microsoft, and Nvidia. Analysts are questioning the sustainability of this valuation if Tesla's sales growth and margins continue to weaken.

Tesla's Evolution into a Traditional Auto Company

Analyst Toni Sacconaghi from Bernstein remarked that Tesla is increasingly resembling a traditional auto company. This observation reflects growing skepticism among analysts about Tesla's unique position in the market as it faces challenges related to sales growth, competition, and operating margins.

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CarBike360 Says

As Tesla's stock witnessed a historic freefall, the electric vehicle giant finds itself at a critical point. Elon Musk's warning about a potential slowdown in sales growth for 2024, coupled with weaker-than-expected quarterly results, has raised concerns among investors and analysts alike. The significant market value wipeout prompts a reassessment of Tesla's standing in the electric vehicle landscape, with questions about competition, operating margins, and the sustainability of its premium valuation. As the industry grapples with a broader slowdown in demand, Tesla faces the challenging task of navigating a path forward while redefining its identity in an ever-evolving automotive market. The coming months will undoubtedly be pivotal for Tesla as it seeks to address these challenges and reassure investors about its long-term prospects.