- Tesla Inc. (TSLA) has seen a significant decline, losing nearly 12% year-to-date and about a quarter of its value in less than two months, totaling a $400 billion drop, making it the worst performer among megacap peers.
- Analysts like Mark Newton from Fundstrat predict further drops, potentially to $314, suggesting there’s no immediate catalyst for recovery, while Evercore ISI’s Chris McNally notes no significant updates on self-driving tech until June.
- Tesla’s shares are trading at about 120x projected earnings, far above the “Magnificent Seven” average of 30 and the S&P 500’s 22, highlighting the speculative nature of its valuation which might lead to further correction without tangible improvements.
Tesla Inc. (TSLA), closing recently at $355.84, has experienced a significant downturn, losing nearly 12% year-to-date and shedding roughly a quarter of its value in less than two months, equating to a $400 billion drop. Despite this considerable decline, Wall Street analysts are signaling caution to prospective investors, indicating that the stock, which has been the worst performer among megacap peers and the third-weakest in the Nasdaq 100 Index (NDX) this year, might not have reached its nadir yet.
Mark Newton, head of technical strategy at Fundstrat, predicts a further decline, telling Bloomberg that the price could dip to around $314, a level last seen post-US election, which would be about 12% below current levels. He bases this on technical analysis, noting no immediate catalysts for a recovery in sight. Similarly, Chris McNally from Evercore ISI points out that there’s little room for additional positive hype around Tesla’s full-self-driving and autonomous vehicle technologies until June, when the company plans to launch its robotaxi service.
The valuation of Tesla shares also raises eyebrows; they trade at abaout 120 times projected earnings, significantly higher than the average for the “Magnificent Seven” group, where it stands at 30, and the broader S&P 500 Index (SPX) at 22. This high P/E ratio underscores the speculative nature of Tesla’s stock price, driven more by future expectations of technological breakthroughs rather than current financial performance. Analysts argue that without forthcoming significant developments or improvements in profitability, the justification for such a premium valuation remains weak, potentially setting the stage for further correction in stock value as investor sentiment adjusts to these realities.
This scenario paints a picture of Tesla at a crossroads, where the promise of innovation in autonomous driving and electric vehicles must soon meet tangible results to justify its lofty market expectations. Until then, the consensus among analysts seems to lean towards a cautious approach, advising investors to be wary of jumping in too soon, as the stock still has potential for further downside before any sustained recovery might be in sight.
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