Tesla's Downward Spiral: Stock Plunges 33%
Tesla's (TSLA) stock has been in a relentless decline since February, with a drop of 33% from its all-time high in December 2024. The stock's latest pre-market loss of 2% to $321 per share continues a significant downturn.
Tesla's Underperformance
TSLA is the worst-performing member of the "Magnificent Seven" tech giants: Meta (META), Amazon (AMZN), Microsoft (MSFT), Nvidia (NVDA), Google parent Alphabet (GOOG, GOOGL), and Apple (AAPL). Elon Musk's net worth, closely tied to Tesla's fortunes, has plummeted $54 billion year-to-date, making him the world's richest person with a net worth of $378 billion.
Factors Driving the Decline
According to Wedbush analyst Dan Ives, "the bears are owning the narrative." Weak sales in key overseas markets, concerns about Musk's association with former President Donald Trump, and rising costs due to tariffs are weighing on Tesla's performance.
Tesla's sales in China dropped 33% in January, while sales in Australia fell by the same margin year-over-year. The Trump administration's tariffs on steel and aluminum, as well as the trade war with China, are also increasing costs for the automaker.
Tesla's Financial Performance
Tesla's fourth-quarter results also disappointed, with EPS missing analyst estimates and automotive sales declining by 8% year-over-year. Despite the sell-off, Tesla's stock remains overvalued, trading at a forward price-to-earnings ratio of 111 times. In comparison, the S&P 500's forward PE ratio is around 22 times.
Oppenheimer analyst Colin Rusch believes Tesla's valuation could face challenges in the future unless the company delivers on its promises of robotaxis and humanoids.