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Tesla shares suffer from New Year’s hangover due to concerns, delivery issues

  • Stock top S&P 500 loses on first trading day in 2023
  • The selloff knocks $50 billion off the market value
  • Tesla misses estimate for vehicle deliveries for the fourth quarter
  • The EV company is still the world’s most valuable car manufacturer

Jan 3 (Reuters) – Tesla Inc ( TSLA.O ) shares started 2023 with a thump, plunging more than 12% on Tuesday on growing concerns about weakened demand and logistics problems that have hampered deliveries to the world’s most valuable carmaker.

Once worth more than $1 trillion, Tesla lost more than 65% in market value in a tumultuous 2022 that saw it increasingly challenged by other automakers and facing production problems stemming from COVID shutdowns in China.

Tuesday’s slide dropped nearly $50 billion in market value, roughly equal to the valuation of rival Ford Motor Co ( FN ), which last year sold three times as many cars as Tesla.

The sale came after Tesla missed market expectations for deliveries in the fourth quarter despite shipping a record number of vehicles.

Reuters graphics

“Tesla, as it has grown, is now entering a phase of continued solid but slower growth,” said Morningstar analyst Seth Goldstein. As a major automaker, “it will probably feel more of an impact from an economic downturn,” he added.

Several Wall Street analysts said they expected more pressure on the stock in the coming months from increasing competition and weaker global demand.

In recent months, global automakers have battled a slowdown in demand in China, the world’s top auto market where the spread of COVID-19 has hit economic growth and consumer spending. Tesla offers big discounts there and a subsidy for insurance costs.

At least four brokerages cut their price targets and earnings estimates on Tuesday, pointing to the delivery misses and Tesla’s decision to offer more incentives to boost demand in China and the United States, the two biggest global auto markets.

The company’s stock was the worst performer on the benchmark S&P 500 (.SPX) on Tuesday when it fell as low as $104.64 a share — the lowest since August 2020. More than 220 million shares changed hands in regular trading hours.

The electric car maker’s performance in 2022 was among the worst on the S&P 500 index.

Members of the media and guests surround the Tesla Model Y and Model 3 during Thailand Tesla’s official launch event in Bangkok, Thailand, December 7, 2022. REUTERS/Athit Perawongmetha

“You have so many things working against the stock. One is obviously Musk’s involvement in Twitter,” said Dennis Dick, market structure analyst and trader at Triple D Trading.

Tesla’s market value has fallen by about $370 billion since CEO Elon Musk closed the deal to buy social media firm Twitter.

Some of that decline has come from his stock sale to finance the $44 billion deal, while the stock also fell on concerns among investors that Musk has been distracted by the social media company.

With a value of about $341 billion, Tesla remains the world’s most valuable carmaker, although output is a fraction of rivals such as Toyota Motor Corp ( 7203.T ).

Tesla shares biggest loser among Big Tech Tesla shares biggest loser among Big Tech since April

Tesla delivered 405,278 cars in the fourth quarter, less than analysts’ estimate of 431,117. For all of 2022, deliveries increased by 40%, missing Musk’s annual target of 50%.

The result “came at the expense of higher incentives, suggesting lower prices and margins,” brokerage JPMorgan said in a note, lowering its price target by $25 to $125.

The median price target of 41 analysts on the stock was $250, more than double today’s price, according to Refinitiv data. The lowest price is $85, from Roth Capital Partners.

The shortfall highlighted the logistics hurdles facing the company, which is known for its end-of-quarter delivery rush. The gap between production and deliveries has increased to 34,000 cars as more cars got stuck during transport.

The automaker plans to run a reduced production schedule in January at its Shanghai plant, extending the reduced output it started in December into 2023, Reuters reported.

Reuters graphics

Reporting by Aditya Soni, Eva Mathews and Akash Sriram in Bengaluru; Additional reporting by Amruta Khandekar; Editing by Tomasz Janowski, Shounak Dasgupta and Arun Koyyur

Our standards: Thomson Reuters Trust Principles.

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