Tesla’s stock has taken another hit, with a 40% year-to-date decline and dropping to its lowest price since January. The company’s recent struggles include a recall of all 3,878 Cybertrucks on the road, as well as significant misses in sales and profits in January. Analysts expect a further dip in revenues and profits in the upcoming financial results. Despite these challenges, Tesla is still valued as a growth stock, even though it is not currently growing and is not expected to in the near future.
The potential reasons behind Tesla’s high valuation despite its poor performance include the belief in the company’s long-term potential in artificial intelligence and its robotaxi program. While Tesla has shown growth in electric vehicle deliveries and has maintained strong capital discipline, the timeline for success in these areas may be longer than many investors anticipate. Addressing the challenges in the robotaxi program, for example, will require significant technological, regulatory, and operational hurdles to overcome.
A significant development occurred when ExxonMobil overtook Tesla in market cap, symbolizing a shift from the most valuable renewable energy car company to the largest U.S. oil company. Tesla has underperformed the S&P index since the beginning of 2021, but those who invested before the company’s meteoric rise during the Covid-19 pandemic have still experienced better returns compared to the broader market. Elon Musk, Tesla’s CEO, has faced personal challenges as well, with his net worth dropping significantly since its peak in 2021, mainly due to his purchase of Twitter and controversial actions taken at the social media platform.
Analysts believe that the core thesis for investing in Tesla has shifted, from being primarily attractive to those interested in electric vehicles to those who believe in the company’s potential in AI and the success of its robotaxi program. Despite the challenges the company currently faces, some investors remain hopeful that Tesla can eventually achieve significant profits through its autonomous driving initiatives. However, the timeline for achieving this is uncertain, and there are many obstacles to overcome in order to reach the projected levels of success.
As Tesla continues to grapple with financial losses and market uncertainties, the future remains uncertain for the electric vehicle company. While some analysts remain optimistic about its potential in AI and autonomous driving, others caution that the road ahead may be more challenging than investors anticipate. With a high valuation despite current struggles, Tesla will need to navigate through a series of obstacles to regain its position as a leader in the market.
