Out of the seven largest companies in the S&P 500 stock index, including Amazon, Microsoft, Apple, Alphabet, Meta, Nvidia, and Tesla, Tesla is the only one whose estimated profit for 2024 has significantly declined compared to a year ago. Since the third-quarter earnings season began in mid-October, Tesla's stock performance has been notably weaker than the other companies in this group. This decline in Tesla's stock value followed CEO Elon Musk's revised growth expectations, coupled with concerns about slowing demand and pessimistic forecasts from rival automakers, as reported by Bloomberg on November 3, 2023.
As the most prominent electric vehicle brand and the largest dedicated EV manufacturer globally, this slowdown has prompted increased scrutiny of Tesla's premium market valuation, which stands at approximately $690 billion. Such a valuation leaves very little room for error, according to the report, and the proportion of bullish analyst ratings has reached its lowest point since April 2021, indicating a rising level of skepticism among Wall Street analysts. Matt Maley, chief market strategist at Miller Tabak + Co., expressed that "The outlook for EV demand is a significant challenge for Tesla," noting that their ongoing price reductions are already affecting their performance, and reduced demand could further intensify this issue.
Tesla stands out among the seven largest companies in the S&P 500 stock index, which includes Amazon, Microsoft, Apple, Alphabet, Meta, Nvidia, and Tesla. It is the only company among them to witness a significant decline in its estimated profit for 2024 compared to a year ago. Starting from the beginning of the third-quarter earnings season in mid-October, Tesla's stock performance has been notably weaker compared to the other companies in this select group.
This decline in Tesla's stock value can be attributed to CEO Elon Musk's revised growth expectations, coupled with concerns about slowing demand and pessimistic forecasts from rival automakers. Bloomberg reported these developments on November 3, 2023. As the most recognizable electric vehicle brand and the world's largest dedicated EV manufacturer, this slowdown has resulted in increased scrutiny of Tesla's premium market valuation, which currently stands at around $690 billion. Such a valuation offers very little room for error, and the report highlights that the percentage of bullish analyst ratings has reached its lowest point since April 2021. This trend reflects growing skepticism among Wall Street analysts.
Matt Maley, chief market strategist at Miller Tabak + Co., pointed out that "The outlook for EV demand is a significant challenge for Tesla." He emphasized that Tesla's ongoing price reductions are already impacting their performance, and any further decrease in demand is likely to exacerbate this issue.
Tesla's lower-than-expected growth projections for 2024 could be influenced by a broader deceleration in electric vehicle (EV) adoption, as indicated by Deutsche Bank analysts Tim Rokossa and Emmanuel Rosner in a recent note. They suggest that the next wave of EV consumers may demand more affordable initial pricing and could be awaiting infrastructure improvements, particularly an expansion of charging station availability.
The analysts express concern that while US consumers will enjoy a $7,500 EV incentive credit at the point of sale starting on January 1, 2024, this alone may not be adequate to drive a surge in demand, especially in light of the current record high interest rate environment.
Despite these challenges, Tesla enthusiasts maintain their belief in the long-term potential of electric vehicles, as many experts and analysts view EVs as the future of the automotive industry. While the competition to dominate this market will be fierce, these investors are banking on Elon Musk's capacity to keep Tesla at the forefront.
Matthew Tuttle, chief investment officer and CEO at Tuttle Capital Management, stated, "EVs have some big problems, but Tesla is way beyond just an EV company because of Elon Musk," emphasizing that Musk's involvement allows for a higher valuation than Tesla would have as solely an EV manufacturer.
If Elon Musk's recent decisions, such as investing $44 billion in the company formerly known as Twitter to create a platform for various controversial groups, including hate groups, climate deniers, and right-wing extremists, are indeed seen in that light, they could potentially lead some analysts to reconsider their view of him. Many individuals have become increasingly apprehensive about his mental stability, especially in light of the revelations presented in his latest biography.
The first production Tesla Cybertruck is set to be delivered to a paying customer on November 30, 2023. This event might have the potential to boost the company's fortunes and potentially improve its stock price, although Elon Musk acknowledged the challenging ramp-up during the Q3 earnings call, stating, "The ramp is going to be extremely difficult." Musk also mentioned during a recent appearance on The Joe Rogan Experience that the Cybertruck could weigh either 6,000 or 7,000 pounds, depending on the version. In comparison, other electric trucks like the Ford F-150 Lightning and Rivian R1T are also quite heavy. Musk also noted that the Cybertruck would offer an optional "beast mode" for rapid acceleration and that it would have optional bulletproof windows, although they would be fixed and not retractable.
During the interview, Joe Rogan shot an arrow at the Cybertruck, which bounced off, leaving a small dent in the bodywork. Rogan commented on the unique appearance of the vehicle, describing it as "the coolest looking production car that's ever been made." However, the real test of the Cybertruck will be how well it performs the typical tasks expected of a pickup truck. Elon Musk mentioned that there would be three demonstrations to showcase the Cybertruck's bulletproof capabilities, including testing it against a Tommy gun, a 45 millimeter shotgun, and a 9 millimeter gun. Musk emphasized the ruggedness and toughness that are associated with trucks.
The fate of Tesla's shares hinges on the success of the Cybertruck. If it becomes a popular choice, Tesla's stock price may surge, leading to accolades for Musk's genius. Conversely, if it fails to gain traction, the stock price could decline, prompting criticism of Musk's decisions. The reality might be a combination of both outcomes. As the Zen master would say, "We'll see.