What is weighing in the stock?

Tesla’s shares fell up to 8% on Friday morning. Since then, they have rebounded and dropped less than 4%, as the markets showed a dramatic recovery on Friday night, but the stock still lost more than 15% of its value in the year and ended below $ 600 by first time since December 4th. .

Here are some of the biggest factors that are weighing on cult stocks and knocking the world’s richest crown off the head of Elon Musk – the CEO owns about 22% of Tesla’s shares.

On Thursday, Fed Chairman Jerome Powell said that “upward pressure on prices” and “transitory increases in inflation” may be coming to the US with the reopening of the economy after a year of Covid restrictions that hit business in all sectors.

The market is now concerned about rising interest rates and the feds will not take aggressive political measures or even manage to control it. Bond yields are increasing.

This is causing a broader correction in technology stocks, which are valued based on the presumption of strong growth in future cash flows. As inflation rises, the value of these future cash flows decreases. As CNBC previously reported, the Nasdaq 100’s list of the 100 largest non-financial stocks on the stock exchange fell by about 8% from the historic highs reached three weeks ago.

This is affecting most technology giants. For example, Apple fell from approximately $ 129 to $ 121 for the year, and Netflix fell from about $ 523 to $ 516. But Tesla’s decline is more steep, so far.

Some of Tesla’s biggest and most expressive supporters withdrew a portion of their shares and began to recognize the violent onslaught of the electric vehicle competition as a real challenge for Tesla, finally.

For example, Ron Baron sold 1.7 million Tesla shares and invested in two of the company’s biggest potential rivals, Cruise, owned by GM and Rivian, backed by Amazon, while paradoxically saying he expects Tesla shares to rise, eventually to $ 2,000.

Former Tesla board member Steve Westly said at CNBC’s Power Lunch this week that, while remaining optimistic, “Tesla will not be the king of the hill in the electrical sector forever.” He added: “They are receiving competition from all sectors. They will have to double to compete.”

In fact, automakers, including Ford and Volkswagen, have had initial success with sales of their electric vehicles, including Mach E and ID.3, against Tesla models in the United States and Europe.

Meanwhile, upcoming EVs, including Ford’s all-electric version of the F-150, the Lucid Air, Rivian’s SUVs and electric trucks, and others are stimulating excitement. Just yesterday, Porsche showed off the production version of its Taycan Cross Turismo and said it would start selling in the United States this summer. It is a $ 90,000 EV station wagon, a practical and affordable version of Porsche’s performance EV, the Taycan.

The scarcity of semiconductors has caused most car manufacturers to temporarily close some lines at their plants, and Tesla is no exception.

Tesla CEO Elon Musk acknowledged that the company’s factory in Fremont, Calif., Temporarily closed due to “parts shortages” in a Feb. 25 tweet. He said it was closed for just two days, but made it unclear whether partial closures on some lines would continue.

Tesla had previously warned in its fourth quarter 2020 earnings call and filing that chip shortages could hurt its vehicle production targets in the first half of 2021.

CFO Zachary Kirkhorn said in the conference call with investors that, for the first quarter of 2021:

“[Model] Production of S and X will be low due to the transition to newly re-engineered products. In addition, we are working hard to manage the global semiconductor shortages, as well as port capacity, which may have a temporary impact. “

If Tesla did not produce a large volume of vehicles, due to a shortage of parts or delays in sending parts from abroad to its plants in the United States, the company would not generate as many regulatory credits as it wishes. Tesla sells these environmental credits to other automakers, which is how it has historically achieved profitability.

Cost control has been on the mind of CEO Elon Musk for years.

In December 2020, he wrote by email to all Tesla employees: “Investors are giving us a lot of credit for future profitability, but if, at any time, they conclude that this is not going to happen, our shares will be immediately crushed. like a souffle under a sledgehammer! “

But at the same time, Tesla is in a phase of expansion that will be costly. The EV manufacturer is building factories in Austin, Texas, in Brandenburg, Germany and expanding its presence in China. He also embarked on renovating aspects of his facilities in Fremont, including the paint shop, the area of ​​the factory where his cars are painted.

Musk also has ambitions for Tesla to mine its own lithium, internally. And to increase the production of Tesla’s own battery cells at a pilot plant also in Fremont.

In addition to these efforts, the company is experiencing expensive recalls and may face more – whether voluntary or mandatory. The most significant of these voluntary recalls, in China and the United States, is that Tesla is recalling models S and X vehicles that have touch screen flaws.

–Jessica Bursztynsky contributed to this report.

Correction: Tesla ended with a 3.78% drop on Friday.