Tesla’s 30% YTD Plunge: S&P 500’s Biggest Loser

Quick Look

• Tesla began 2024 as part of the esteemed “Magnificent Seven,” following a stellar performance in 2023.
• The company finds itself grappling with a 30% stock decline year-to-date, marking it as the S&P 500’s largest loser.
• Amidst signs of an EV sales slowdown, Tesla faces challenges that test its growth narrative and market sentiment.

Tesla, the pioneering electric vehicle (EV) manufacturer, kicked off the year on a high note, joining the ranks of the “Magnificent Seven” group thanks to its impressive triple-digit stock gains in 2023. However, close to three months into the year, Tesla’s fortunes have taken a sharp turn. The company’s stock has plummeted approximately 30% year-to-date, erasing about $230 billion from its market valuation and earning it the dubious title of the S&P 500’s biggest loser so far this year.

Unraveling Tesla’s Tumble

The stark reversal in the company’s fortune contrasts sharply with its previous year’s achievements. The company now trails behind the crisis-stricken planemaker Boeing, which has seen a nearly 29% decline following a significant incident with an Alaska Airlines 737 MAX. This event stirred investor concerns regarding safety, further putting Tesla’s performance in a dim light.

Tesla’s decline is primarily attributed to signs of a slowdown in EV sales. After relinquishing its crown as the world’s top EV seller to Chinese competitor BYD last year, there are growing concerns about weakening demand for Tesla’s vehicles, both in the U.S. and internationally. This downturn has sparked discussions about Tesla’s inability to sustain its high-growth stock status, a sentiment echoed by Morningstar analyst Seth Goldstein. “It’s supposed to be a high-growth stock, and this year it seems it won’t achieve that level of growth,” Goldstein remarked, highlighting the market’s sensitivity to growth slowdowns in such companies.

Critical Moments Ahead

As Tesla approaches its first-quarter earnings report on April 17, 2024, the stakes are high. Analysts are expecting a significant slowdown in earnings per share. This slowdown is in comparison to the last quarter of 2023. Consequently, these results will likely be pivotal. They will shape Tesla’s perception among investors. “The first-quarter results will be very telling for Tesla’s trajectory this year,” Goldstein remarked. He added that there’s a potential for a further decline in stock value. This could happen if the growth narrative falters.

Despite the challenges, Tesla has its staunch supporters. For instance, analyst Garrett Nelson from CFRA has set a $275 price target for Tesla’s stock. This target is significantly above its current level. It highlights the ongoing debate about the company’s valuation. Currently, Tesla trades at 55 times its forward earnings. This figure, despite recent declines, suggests a premium valuation. Especially when compared to its peers within the “Magnificent Seven.”

Amidst the financial turbulence, concerns are rising among some shareholders. They question whether Elon Musk’s leadership style is affecting the company’s performance negatively. Investor Ross Gerber voiced a need for “a real CEO.” He believes a new CEO could steer the company forward. Gerber’s comments highlight the growing scrutiny of Musk’s role amidst the stock’s decline.

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