Tesla’s market value plummeted below the $500 billion mark on Tuesday with stock closed down 2.7% at $157.11 in New York trading, marking a worrisome decline for investors who had been bullish on the company's prospects.
The dip reflects a broader trend, with Tesla shares shedding 37% of their value since the beginning of the year, positioning it as the second-biggest decliner on the S&P 500 Index in 2024.
The latest blow to Tesla's market standing came with the announcement of substantial job cuts, further highlighting concerns about the company's demand outlook.
Analysts have pointed to a series of challenges facing Tesla, including a slowing demand for EVs and the company's decision to pivot away from plans for a cheaper EV toward the development of a "robotaxi."
Ryan Brinkman, an analyst at JPMorgan Chase & Co, stated, “The retrenchment in employment and capacity has far-reaching implications for the hypergrowth narrative still embedded in Tesla’s share price, suggesting material downside risk for the stock.”
Tesla's troubles first emerged in October when it signaled a slowdown in EV demand, a trend that became more pronounced with disappointing first-quarter sales figures.
The company's decision to refocus its efforts on a robotaxi instead of a more affordable EV has raised concerns among investors about its profit outlook.
Despite Tesla's ambitious plans for self-driving technology, analysts emphasize the importance of producing affordable EVs to sustain growth in the interim. David Wagner, a portfolio manager at Aptus Capital Advisors, noted, “The near-term bull case for Tesla is that investors are awaiting the launch of a lower-cost platform that will dramatically reinvigorate growth.”
Competition in the EV market is intensifying, particularly from Chinese manufacturers like BYD Co., which overtook Tesla as the world's biggest seller of electric cars in late 2023.
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