Once the darling of the stock market, Tesla Inc. (TSLA) is experiencing a severe sell-off that has even the most devoted Elon Musk fans pulling back to the sidelines. With its stock down 52% from its all-time high in mid-December, the electric vehicle (EV) giant has become the worst performer in the S&P 500 Index this year. Investors remain wary even after former President Donald Trump’s public support caused a brief rally, as the worst may not be over. Tesla stock plummets
One of the sharpest single-day drops in Tesla’s history occurred on Monday, with shares falling 15%. Surprisingly, President Trump said he would buy a Tesla to back Musk. By Tuesday, he had selected a red Model S, and the stock somewhat recovered. However, even this presidential endorsement has not been sufficient to rebuild faith among long-term investors.
Why Are Investors Nervous About Tesla Stock?
Many are wondering whether Tesla’s stock can bounce back from its dramatic fall. Brian Mulberry, a client portfolio manager at Zacks Investment Management Inc., which manages $21 billion in assets, thinks the stock might drop even further. “Right now, this stock is trading on emotions; the downside pressure is winning. There is more space for the stock to drop during the next thirty to sixty days. In the near term, it can readily drop to $200 or perhaps less,” he said.
Mulberry is not alone in his wary perspective. Wall Street analysts, including some who have long been optimistic about Tesla, are lowering their price targets and cautioning about negative sentiment and inadequate sales. At least four analysts have lowered their price targets over the past week, while others have voiced concerns about Tesla’s ability to maintain its current rate of growth.
Retail Investors: The Last Line of Defense
One group has remained steadfast despite the general retreat: retail investors. Emma Wu, a global quantitative and derivatives strategist at JPMorgan Chase & Co., claims retail buyers of Tesla stock have purchased a net $2.8 billion since last Tuesday. Often among Musk’s most devoted followers, these small investors are betting on a comeback.Tesla stock plummets
Even their passion, though, might not be sufficient to reverse the declining trend. Following the 2020 election, Tesla’s stock has lost all the gains it acquired as investors speculated that Musk’s close ties to the incoming government would help the business. Now, with growing difficulties in the EV industry and broader economic uncertainty, Tesla’s future seems increasingly hazy.
What’s Driving the Sell-Off?
Several factors are driving Tesla’s stock drop:
- Increased Competition: Established manufacturers like Ford and General Motors are stepping up their electric offerings, increasing competition in the EV space.
- Geopolitical Concerns: Tesla’s reliance on China for manufacturing and sales is becoming a liability amid growing geopolitical tensions.
- Economic Uncertainty: Broader market volatility and concerns about inflation are weighing on investor sentiment.
For a deeper understanding of the obstacles Tesla faces, check out our research on Tesla’s difficulties in 2024.
What is Tesla’s Future?
Some analysts remain hopeful about Tesla’s long-term future despite the current upheaval. Mulberry, for example, thinks the stock might recover to above $400 next year. However, he and many others are temporarily on the sidelines, waiting for more definite indicators of stability.
In the meantime, Tesla’s leadership must address the issues causing the sell-off. This includes raising production efficiency, growing its market share, and reassuring investors of its ability to navigate the obstacles ahead. Even Musk’s most ardent supporters might still hesitate until then.
Whether Tesla can recover its leadership position as the EV market develops will depend on its capacity for adaptation and creativity. For now, the road ahead seems rocky, and investors are bracing for more upheaval.
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