This year, owning Tesla stock has not been an easy journey for investors.
The maker of electric vehicles’ stock has lost about 70% of its value since the year began, and it is expected to rank among the S&P 500’s five worst decliners. The benchmark index is down approximately 20% in comparison.
Even though Tesla has continued to increase its profitability, signals of waning demand and fiercer competition are making investors nervous.
The purchase of Twitter by CEO Elon Musk is another example. Some of Elon Musk’s decisions made since he took control of the social media firm, such as getting rid of a framework for content moderation designed to deal with hate speech and other issues on the platform, have alarmed Twitter’s advertisers and alienated some users.
Wall Street is now worried that the billionaire’s attention is being diverted too much by Twitter, which could upset his devoted Tesla fans.
According to Wedbush analyst Dan Ives, this week’s stock collapse was driven by Musk’s acquisition of Twitter, which sparked a political uproar and damaged Musk and Tesla’s reputations.
According to Musk, he intends to continue leading Twitter until he can identify a suitable candidate to take his place.
Tesla’s performance this year has been strong despite Musk’s attention on Twitter. Through the first three quarters of 2022, the Austin, Texas-based company reported year-over-year increases in revenue and profit, with its third-quarter earnings more than tripling that of the previous quarter.
Even still, Tesla’s monopoly in the United States is beginning to be challenged by electric vehicle models from other automakers. EV industry.
Tesla held around 80% of the EV market from 2018 to 2020. S&P Global Mobility data show that its market share fell to 71% in 2021 and has since been declining.
In a rare step this month, Tesla started giving discounts on its two best-selling models through the end of the year, indicating that demand for its electric cars is waning.
When Tesla releases its fourth-quarter results, Ives believes the firm will likely fall short of Wall Street’s expectations.
He bases this prediction on greater inventory levels, recent price reductions, and general production slowdowns in China.
As for 2023, he anticipates a “softer trajectory.”
The reality is that Tesla is facing significant macro and company-specific EV competition headwinds into 2023 that are beginning to materialize both in the U.S. and China, according to Ives. “After a Cinderella story demand climate since 2018,” he said.
In spite of this, Ives is confident in Tesla’s long-term prospects as the demand for electric vehicles expands globally and Musk refocuses on Tesla.
However, he said, “Any additional Musk strategic blunders will be closely examined by the Street and further weigh on shares.”