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With a YTD loss of almost 34%, Tesla (TSLA) was the worst-performing S&P 500 Index ($SPX) stock through the end of last week's trading. Today's pop aside, there hasn’t been much reprieve for investors - and if anything, the sell-off only worsened last week after Tesla released its Q1 delivery report. Is the worst over for Tesla stock as it tries to bounce from its 52-week lows? We’ll discuss this in this article.
Tesla’s Q1 Delivery Report was Disastrous
Tesla’s Q1 delivery report was dismal, to say the least, and marked the first time since 2020 that its deliveries fell on a YoY basis. The last thing markets would expect from a supposed growth company, whose CEO predicted a long-term delivery CAGR of 50%, is a fall in deliveries.
To be sure, Tesla warned that its 2024 delivery growth “may be notably lower than the growth rate achieved in 2023” - but the Q1 performance could not even clear the low bar that analysts had set.
According to Tesla, the fall in its volumes was “partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.”
While the argument has merit, it still does not explain the massive gap in Tesla’s production and deliveries, and shows a massive inventory buildup. The demand for electric cars has been much weaker than what most observers predicted, and companies are struggling to sell cars to capacity.
What Else is Plaguing TSLA Stock?
Tesla is also plagued by an aging car lineup. The bulk of its sales come from Model 3 and Model Y, and while it started delivering the Cybertruck pickup model last year, it is still far away from mass production.
While Elon Musk denied reports that Tesla is scrapping its low-cost car project, the fact remains that the company is already late in launching the model – especially in China, where rival BYD (BYDDY) has cars at multiple price points, with its Seagull model starting below $10,000.
Apart from these factors, Musk’s antics might also be scaring off some potential Tesla buyers. While Musk has always been a polarizing personality, a survey by market intelligence firm Caliber showed that Tesla’s “consideration score” fell to 31% in February, which is less than half of the 70% it scored in November 2021, when the company started tracking Tesla.
Musk acquired Twitter (which he later renamed X) in 2022, and his antics since acquiring the social media platform - coupled with his pivot to more right-wing politics - might have also played a part in Tesla’s slowing sales.
Caliber’s survey showed that 83% of Americans connect Musk with Tesla, and the firm’s CEO Shahar Silbershatz said, “It's very likely that Musk himself is contributing to the reputational downfall."
Cathie Wood Buys Tesla
Meanwhile, amid all the gloom and doom, Cathie Wood of ARK Invest – arguably among the biggest (if not the biggest) Tesla bulls – bought more Tesla shares last week. Wood has set a base case 2027 target price of $2,000 on Tesla, which is quite optimistic compared to the consensus. Even her bear case target price is $1,400, while the bull case target price is $2,500.
Importantly, according to ARK’s valuation model, 44% of Tesla’s 2027 revenues and 67% of the enterprise value will come from its robotaxi business.
Tesla To Unveil Robotaxi
Musk has now said that Tesla would unveil its robotaxi on Aug. 8. The stock is higher today, though perhaps not to the extent that one would have thought, considering how crucial the robotaxi business is for its valuation. Musk had previously predicted a million robotaxis by 2020, as well. The company has also missed several self-imposed deadlines for full autonomy - most recently in 2023, when Musk was quite confident of reaching full autonomy by the “end of the year.”
It seems markets want to get more concrete details about the robotaxi, and mere announcements won't move the needle much, given how flexible Tesla and Musk have been with deadlines in the past.
Is the Worst Over for Tesla Stock?
Tesla is currently in the penalty box. Not only have the market sentiments toward EV stocks soured, but Tesla’s new growth ideas are at least a couple of years away.
As Musk said during Tesla’s Q4 earnings call, “Tesla is currently between two major growth waves. We're focused on making sure that our next growth wave driven by next-gen vehicle, energy storage, full self-driving, and other projects is executed as well as possible.”
The energy, autonomous driving, robotaxi, and artificial intelligence (AI) products will now become increasingly important for Tesla as the growth in its automotive business slows down.
Incidentally, the company reiterated its focus on the energy business when it also provided the figures for Q1 energy deployment along with the vehicle production and delivery numbers.
Bulls already attribute most of Tesla’s valuation to the software business, and last week, Wood said, “We think that the robotaxi opportunity globally will deliver $8 [trillion] to $10 trillion in revenue by 2030 and is one of the most important investment opportunities of our lifetimes.” She reiterated her bullish bet on TSLA stock, and said, “Now is not the time to run for the hills.”
I would side with Wood here, and believe that the worst looks to be almost over for Tesla stock, and it should see buying support at these levels despite the headwinds. While we could see some volatility when Tesla releases its Q1 earnings later this month, these are good levels to accumulate TSLA stock for the long term.
On the date of publication, Mohit Oberoi had a position in: TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
