Tesla Stock Suffers December Selloff Amid Demand Concerns, China Production Pause
Tesla<span class="company-name-type"> of the corporation</span>
TSLA <span>3.31%</span>
Stocks have endured December's blow as automakers headed for their worst year in history tripped over renewed demand concerns and China factory closures.
Elon Musk's electric car maker is cruising to its worst December stock performance, enduring a seven-day losing streak through Tuesday's close. It was Tesla's longest losing streak since September 2018, when the company struggled to get the new Model 3 into the hands of customers. </p><div>
<p>Tesla has given up almost a third of its value in its recent seven days of losses, returning to August 2020 levels. Shares recovered somewhat on Wednesday, closing more than 3% higher.
Tesla has steady earnings and is on pace to deliver its biggest annual profit ever, but a number of factors, including Musk's bid to buy Twitter, are making investors uneasy. And turn social media platforms around.
In addition to investor concerns, rising interest rates are raising questions about the demand that has hurt once-winning growth stocks across markets. These have intensified recently as Tesla offered shoppers huge discounts to get them to buy the car before the end of the year. It's the kind of move that's more closely tied to traditional automakers than Tesla, which Mr. Musk has often jaded on the marketing gimmicks employed by traditional car companies.
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<p>Tesla, the largest auto company by market capitalization, still boasts valuations that outperform traditional Detroit, European and Asian rivals despite rolling out some old-fashioned car-building sales tricks. Even after the recent crash, Tesla is still trading at around 19.4 price-to-earnings multiples, compared to around 16.7 for the S&P 500. Ford Motor<span class="company-name-type"> Ltd.</span>
and Toyota<span class="company-name-type"> Ltd.</span>
by comparison, recently traded at about 6.4 and 8.5 times their projected earnings.
Tesla isn't the only auto stock to plummet.Market share of small EV rival Rivian Automotive<span class="company-name-type"> Ltd.</span>
lucid group<span class="company-name-type"> Ltd.</span>
Both are down more than 80% this year.
Mr. Musk stepped up worries about demand last week, accusing high interest rates of hurting demand for cars. He also said recession fears could weigh on Tesla's decision to pursue a share buyback that some investors have been clamoring for months. Musk said in October that meaningful share buybacks were likely.
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<h4 class="wsj-article-caption-content">Elon Musk's electric car maker is headed for its worst December stock performance.</h4>
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The company's dramatic share price plunge this year has lured investors to bet on further declines. The bearish Tesla investor will make about $17 billion in his 2022, the first profit on record, according to data from S3 Partners.
S3 Managing Director Ihor Dusaniwsky said:
Tesla is also grappling with production issues. Earlier this year, China's strict Covid policies temporarily shut down the automaker's Shanghai factory. This is the largest factory by production volume. Musk later lamented the new factories in Texas and Germany as "giant money furnaces," said a person familiar with the matter.
Musk is optimistic about Tesla's performance and has repeatedly praised the team's execution.
Tesla shares were down almost 70% this year by Tuesday's close. The stock price plunge means Tesla is headed for his third-worst performance in the S&P 500 this year. Second only to his two companies, which are much smaller in terms of market capitalization, is Generac Holdings.<span class="company-name-type">,</span>
Power generation equipment manufacturer, dating app Match Group<span class="company-name-type">,</span>
They are losing 74% and 70% respectively.
<h6>EV rival aiming for Tesla's crown in China</h6>
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In recent months, Tesla's brand image has been hit by Musk's tumultuous involvement on Twitter and some of the comments he made on the platform, according to brand research.
Still, retail investors have doubled, buying a net $16 billion in Tesla stock this year, according to Vanda Research data. That made it the most popular stock among individuals this year, surpassing Apple as the most purchased stock by individuals. On Wednesday, for example, Tesla stock was the most popular buy among retail investors on the Fidelity Securities platform.
Institutional and individual investors invested more in Tesla-related options than any other stock, according to Cboe Global Markets data as of Dec. 15.
"It's one of the hottest stocks," said Viraj Patel, a global macro strategist and retail investor at Banda Research. Selling "attracts bargain hunters."
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Twitter has been in chaos since Elon Musk took office. To get a sense of what's going on behind the scenes, The Wall Street Journal spoke with former Tesla and SpaceX employees to get a better sense of how Musk is leading the company.Illustrated by Ryan Trefes
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Write to Meghan Bobrowsky ([email protected]) and Gunjan Banerji ([email protected]).
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