Tesla’s shares are falling. 4 reasons why

Tesla’s shares are falling. 4 reasons why

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Actions of Tesla (TSLA) fell 6% on Tuesday, after closing 8.5% on Monday, nullifying its year-to-date gains. The stock closed at a record just above $ 883 on January 26 and has since declined. It fell to $ 619 on Tuesday, the first time Tesla’s shares have fallen below $ 700 since December 31.
Tesla announced earlier this month that it had invested $ 1.5 billion in bitcoin. This helped fuel the recent bitcoin boom and, by some estimates, earned Tesla a quick profit of $ 1 billion – more than it ever did from selling cars in a single year.
But on Saturday, in response to a Tesla bitcoin investment critic, Musk tweeted that the prices of bitcoin and another cryptocurrency called Ether “seem high”. This helped to send the price of bitcoin (XBT) Monday’s 9.3% drop in trades, which may have helped bring down Tesla’s shares.

“Bitcoin is the smart move at the right time for Tesla, in our opinion, but the downside is playing with fireworks and risks and volatility are added to Tesla’s story,” said Daniel Ives, technology analyst at Wedbush Securities, who remains optimistic about Tesla Stocks.

Y model prices

Last Thursday, Tesla cut the price of the cheapest version of its Model Y and its best-selling model 3 cars by $ 2,000 each. This raised the price of the “standard range” Model Y, which can travel 244 miles for a fee, to $ 38,490 – and the standard range Model 3 to $ 34,590.

But over the weekend, the cheaper “standard range” version of the Model Y disappeared from Tesla’s sales website, leaving only the most expensive long-range and performance versions of the SUV. Tesla did not explain his decision.

“We see plausible reasons as: the mixture was too distorted for the cheapest variant and therefore would kill its margins, or more likely there was not much demand for the lower variant,” said Gordon Johnson of GLJ Research, one of the most pessimistic critics Tesla shares. He said the recent price cuts and other price cuts show that Tesla vehicles do not have the demand that their fans claim.

“Tesla cannot keep its factories running at capacity without … price cuts,” Johnson said in a note on Monday.

Increased competition

Recently established automakers have set ambitious goals for their own EV sales.

General Motors (GM) launched an SUV version of its Chevrolet Bolt a week ago, priced well below the Model Y, and announced that it plans to sell only emission-free cars after 2035. Ford (F) set an even more ambitious EV target for its European sales, saying that all the car models it sells there will be EVs in 2030.
Apple (AAPL) it is also considering partnering with an automaker to enter the auto business, according to several reports.

These efforts are making some Tesla investors nervous, said Ives, although he believes there will be enough change for VEs for multiple winners among global automakers.

Investors stepped up

Tesla’s shares peaked the day before a disappointing earnings report on January 27, which fell short of Wall Street analysts’ forecasts.
The gains showed that the money Tesla earned from selling regulatory credits to other automakers exceeded its overall net income. Critics, like Johnson, said it is proof that Tesla is not able to make money building and selling cars (although by some other profit measures Tesla is profitable).

During the earnings conference call on January 27, Musk also spoke about the lack of batteries needed to power electric vehicles. He said that even with Tesla’s internal supply of batteries and its planned expansion of battery production, the company is struggling to find the batteries it wants to build more vehicles.

“The fundamental limit for electric vehicles now, in general, is the total availability of [battery] cells, “he said. For example, Musk said Tesla would have already started producing a semitractor if it had the batteries available for that.

Stocks are still rising

Tesla’s shares rose 743%, market leaders, in 2020, with investors embracing the idea that the future of the auto industry would be electric. Tesla remains by far the most valuable automaker in the world, with a market value well above the eight largest automakers combined.

Even with the recent decline. Tesla’s shares have risen about 1,300% since October 2019, when it reported a third-quarter profit that surprised investors by causing the shares to collapse.

Some investors believe Tesla’s shares have flown too high. Still, many analysts believe Tesla will recover. Ives has a target price of $ 950 for 12 months.

Still, he has a warning: “It’s ‘time to put your seat belt on’ again for Tesla’s most volatile stocks on the horizon,” said Ives.

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