Tesla stock has had a very negative year and a particularly poor December thus far. The EV maker’s shares are down 18% so far this month and more than 50% so far in 2022, according to Yahoo Finance.
As a result, Elon Musk is no longer the richest person on earth. Instead, Musk fell to second place on the list of the world’s wealthiest people on Monday. As Tesla shares continued to decline, he dropped below LVMH Moët Hennessy Louis Vuitton CEO Bernard Arnault.
Analysts cite several causes for the astonishing decline in Tesla’s previously invincible stock price.
Wall Street turned bearish on Tesla
First, the likelihood of operational errors at Tesla has increased as Elon Musk focuses on Twitter, the newest addition to his portfolio.
Second, production challenges and the speed of Tesla’s sales in China continue to raise worries within an unpredictable approach to COVID-19 rules.
And last, competition in the EV market in the United States (and China) has only strengthened this year, posing a threat to Tesla’s growth beyond 2023.
As a result, Tuesday evening, Goldman Sachs analyst Mark Delaney lowered his profit expectations for Tesla and his price target for the company to reflect the growing supply of electric vehicles and the risk that demand will deteriorate as the economy slows.
The first indication of problems for Tesla this quarter was the company’s announcement that its manufacturing outpaced deliveries by more than 22,000 vehicles during the preceding three months. CFO Zachary Kirkhorn advised investors on the results call on October 19 to anticipate another “gap” towards the end of the year, as more automobiles will be constructed and remain in transit as the quarter comes to a close.
Almost immediately after that, Tesla reduced pricing across its entire portfolio in China by anything between 5 and 9%. Then, in November, the company gave insurance subsidies, restored a referral program, and advertised on a local retail channel, a departure from Musk’s longstanding goal to eschew conventional marketing.
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Bloomberg then reported last week that Tesla intended to reduce output at its Shanghai manufacturing by around 20% compared to the previous month. Sales in China have decreased due in part to periodic lockdowns that have kept consumers at home. As a result, the corporation began providing more incentives.
“Tesla increasingly appears to have a demand issue,” Toni Sacconaghi, a Bernstein analyst with the equivalent of a sell rating on the stock, wrote in a report last week.
Nevertheless, for many, Elon Musk and Tesla remain “superheroes” as Musk’s cult continues to dominate social media.
Falling below 200WMA
It looks like Tesla’s stock will close below the 200-week moving average this week for the first time since October 2019. If that happens, it could be another bearish impetus, likely sending the price toward the psychological $100 over the medium term.
On the upside, the significant resistance is at spring/summer lows near $200, and the price must climb above it to cancel the current bearish trend.