In a dramatic turn of events, Tesla witnessed a staggering 12% plunge in its stock value on Thursday, January 25, following CEO Elon Musk’s cautionary statements about an anticipated slowdown in sales growth for the electric vehicle (EV) giant. Musk’s remarks, delivered on Wednesday, included a warning that growth would be “notably lower” as Tesla shifts focus towards a more affordable next-generation electric vehicle slated for production at its Texas factory in the latter half of 2025.
While the promise of a cost-effective EV has the potential to boost deliveries in the future, Musk acknowledged the challenges in ramping up production due to the integration of cutting-edge technologies into the new model.
Tesla’s stock decline marked its most significant intraday percentage loss in over a year, resulting in a staggering loss of $80 billion in market value on Thursday alone. For the month, the company’s market capitalisation saw a substantial dip of approximately $210 billion.
The impact of Tesla’s decline reverberated through the EV sector, affecting shares of other electric vehicle manufacturers such as Rivian Automotive Inc, Lucid Group, and Fisker, which experienced drops between 4.7% and 8.8%.
Tesla’s decision to implement price cuts, while intended to stimulate demand, has raised concerns about eroding profit margins. This move comes at a time when the EV industry is already grappling with a prolonged slowdown in demand. The competitive landscape, particularly in China, where Tesla faces competition from BYD, poses further challenges to the automaker.
At least nine brokerages downgraded Tesla’s stock, while seven raised their ratings. The stock now carries an average hold rating with a median price target of $225 (RM1,064), still 23% higher than the closing price of $182.63 (RM863.66) on Thursday.
Short sellers in the market have capitalised on Tesla’s downturn, making it the most profitable US short trade, with gains totalling $3.45 billion so far this year.
The company’s stock currently trades at nearly 60 times its 12-month forward earnings estimates, a premium valuation compared to other major stocks in the market. Analysts express concern that if Tesla’s sales growth and profit margins continue to weaken, its premium valuation might become increasingly difficult to justify.
