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But those looking for bargains might want to take a closer look.
Even after a record 65% drop this year, the electric car maker’s surge in 2020 and 2021 has pushed the company’s stock market value to $389 billion, eclipsing Toyota, General Motors, Stellatis NV and Ford. Exceeded. Combined.
And the company’s stock still trades at higher valuations than most major tech giants compared to expected earnings, and the dizzying growth promised by CEO Elon Musk is likely to continue. It shows expectations of dominating the industry in a few years.
In the short term, however, the company faces increasing challenges, including rising costs, competitive threats and the risk of slowing demand due to the recession. At the same time, Mr. Musk was preoccupied with the acquisition of Twitter, which has led to speculation that it could sell more Tesla stake to keep the loss-making social media company alive and take his eyes off of running the automaker. As a result, it weighs on the stock price. .
Catherine Faddis, Senior Portfolio Manager at Fernwood Investment Management, said: “People are asking themselves, why exactly should they trade at such a premium?”
Such concerns fueled a massive sell-off in Tesla, which plunged its stock price by more than 36% in December. This was the biggest monthly drop since the 2010 initial public offering. Larry says he’s up 1,163% by the end of 2021.
Electric vehicles are still expected to be the future of the global automotive industry. But Tesla’s near-term outlook is clouded by factors such as the trajectory of the economy and soaring raw materials used in its batteries. That has led Tesla to raise prices this year just as consumers are battling rapid inflation and high interest rates. To clean out inventory, Tesla is offering a rare $7,500 of his $7,500 to customers who get delivery by the end of the year, effectively aligning with federal subsidies that may begin in 2023. Offered a discount.
Tesla ready for delivery record despite demand concerns
The company also faces increasing competitive threats from major automakers, which are expected to bring a number of new EVs to market in the next few years.
Nonetheless, the stock market is pricing in Tesla’s continued rapid growth, with brokerage analysts holding more than $350, and 29% recommending selling the stock. It’s been more aggressive with the company than it was a year ago, according to data compiled by Bloomberg. Now that it has fallen to around $123, only 11% are doing so.
Tesla shares are trading at more than 24 times their expected earnings over the next 12 months, while GM and Ford trade between 5 and 6 times. Analysts see Tesla recording his 36% growth.
But news of year-end discounts and temporary production halts at factories in China have raised concerns in recent weeks that the company may be suffering from erosion of demand.
Ivana Delevska, chief investment officer at SPEAR Invest, said Tesla has “both pricing and volume risks.” “Analysts estimate a 50% volume growth, which is too much in an environment where affordability is the focus for consumers,” she said.
With Tesla’s recent decline, some analysts have lowered their 12-month price target, dropping the average by 13% to $247. Morgan Stanley analyst Adam Jonas was one of them, dropping the call to $250 from his $330.
But like those buying the recent decline, Jonas remains bullish on equities and maintains an overweight rating. His goals suggest the stock could more than double his price in 2023.
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