Elon Musk's concerns about Tesla's slowing growth caused the company's stock to record its sharpest daily drop in more than a year on January 25.
Tesla shares fell 12% on January 25 after CEO Elon Musk warned that revenue growth would slow this year despite steep discounts that have eroded profit margins, raising concerns among investors about weak demand for electric vehicles and rising competition from China.
Musk said Tesla's growth would "slow down significantly" as the company focuses on its next-generation, lower-cost electric car, which will go into production in the middle of next year. They expect the car to be a new hit for Tesla. However, he said ramping up production of the car would be challenging because of the breakthrough technology involved.
Tesla shares yesterday recorded their biggest one-day drop in more than a year, wiping out $80 billion in market capitalization. The company has lost $210 billion in market capitalization since the beginning of the month. Tesla's decline has helped short sellers make a profit of $3.45 billion this year, according to data from research firm Ortex.
“The Tesla news is pretty negative right now,” analysts at TD Cowen said, noting that the automaker’s fourth-quarter 2023 revenue and earnings are both below forecasts.
Shares of other US electric car companies also fell. Rivian Automotive, Lucid Group and Fisker fell 4.7-8.8%.
The electric vehicle sector has been struggling with falling demand for more than a year, and Tesla’s price cuts could put further pressure on startups and traditional automakers.
"Tesla's current problem is that if it wants to increase revenue, it has to sacrifice profit margins due to competition from BYD (China) and other rivals," said Michael Hewson, a market analyst at CMC Markets.
However, Tesla is still the most valuable car company in the world . Tesla's price-to-earnings (P/E) ratio is also much higher than that of technology giants like Apple or Microsoft.
Some analysts believe that number will fall if Tesla’s revenue growth and profit margins slow. “Tesla is becoming more and more like a traditional automaker,” said Toni Sacconaghi, an analyst at Bernstein.
Ha Thu (according to Reuters)
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