The tailspin in Tesla Inc shares accelerated on Tuesday, marking their longest losing streak since 2018, as a report of a plan to temporarily halt production at its China factory rekindled fears about demand risks.
Shares of the company closed down 11 percent at US$109.10 for the seventh straight decline and the steepest one-day drop since April.
The electric vehicle maker’s market valuation has shrunk to about US$345 billion, below that of Walmart Inc, JPMorgan Chase & Co and Nvidia Corp. The latest selloff also cost Tesla its position among the 10 highest-valued companies in the S&P 500 Index, a distinction it had held since joining the benchmark in December 2020.
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News of reduced output in Shanghai came on the heels of last week’s report that Tesla was offering US consumers a US$7,500 discount to take delivery of its two highest-volume models before the end of the year, combining to intensify concerns that demand is ebbing.
For Tesla, whose valuation is pinned on its growth prospects, these worries reflect a significant risk.
“Most of the stock’s weakness this year is due to indicators showing flagging demand globally,” said Craig Irwin, an analyst at Roth Capital Partners.
Tesla’s estimated revenue growth “is still amazing, but not [US]$385 billion market valuation-type amazing,” Irwin said, referring to the value at the end of last week.
Analysts on average expect revenue to grow 54 percent this year and 37 percent next year, data compiled by Bloomberg showed.
Tesla has lost 69 percent its value amid chief executive officer Elon Musk’s takeover of Twitter, investor jitters about growth assets and most recently, worries that high inflation and rising interest rates would dampen consumer enthusiasm for electric vehicles.
“Our sense is the company’s market share has peaked and concerns about its over-reliance on China for profits and the factory shutdown are weighing on the stock,” said Jeffrey Osborne, an analyst at Cowen. Tesla “appears to have burned through its backlog as they are resorting to promotions to move cars and delivery lead times are 1-2 weeks in the majority of the world.”
Wall Street analysts started flagging warnings about demand for electric vehicles earlier this month, with the average 12-month price target for Tesla falling 10 percent since the end of last month.
Meanwhile, the average adjusted earnings estimate for this year has declined more than 4 percent from three months earlier.
Still, analysts’ overall stance on Tesla remains bullish, with the highest share of “buy” or equivalent ratings since early 2015.
“Despite the stock’s performance, Tesla’s innovation curve appears to be accelerating, a stark contrast to other large tech companies whose incremental product updates appear stagnant at best,” Canaccord Genuity analyst George Gianarikas wrote in a note last week.
“Green shoots” of recovery might appear next year, Gianarikas wrote.
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