The stock of Tesla plunged severely Monday as the market continued to fall, but then recovered as the main indices did as well.
“A lack of profitability, chip supply difficulties, and a variety of production issues have thrown a heavy shadow over the [electric vehicle] market,” according to Wedbush Securities analyst Dan Ives. “In current risk off market, EV companies find themselves on the wrong side of this market storm with now execution is crucial to rebuilding credibility on the Street one brick at a time,” the analyst continued in an email to CNBC.
Tesla has already recorded record-breaking Q4 deliveries of 308,600 units, bringing the total number of vehicles delivered in 2021 to a staggering 936,172. Tesla delivered 296,850 Model 3 and Y automobiles in the fourth quarter, as well as 11,750 Model S and X vehicles.
Tesla appeared to manage chip shortages and supply-chain concerns more effectively than some competing automakers, which impressed Wall Street.
According to analysts, Tesla currently has the enviable problem of demand outstripping supply. “Key to relieving these challenges” are production launches in Austin, Texas, and Berlin, according to Ives.
Why Is Tesla’s Stock Dropping?
While other electric vehicle manufacturers are struggling to break even and find their footing in the market, Tesla is a seasoned pro. During the pandemic, its stock soared on the back of record deliveries and the Biden administration’s commitment to prioritize electric vehicles as part of its climate change strategy. Investors eager to join in on the electric vehicle action poured money into Tesla’s stock, propelling the firm above the trillion-dollar mark.
In 2022, however, the stock has reversed its trend. Tesla’s stock has dropped by almost 24% since the beginning of the year, despite the business reporting record deliveries and analysts writing gushing letters of recommendation.
However, the carmaker must still deal with the market’s overhang of a tech sell-off. The Nasdaq is in the midst of a record sell-off after falling into correction zone. 2 Speculative investments are being phased out of investors’ portfolios. This list includes stocks with projected earnings in the future.
A good example is Tesla. While the electric vehicle market has recently gotten a legal boost, it has yet to gain enough traction to compete on an equal footing with gasoline vehicles. During the first half of 2021, for example, electric vehicles accounted for only 7% of the worldwide automobile market. 3 A Fed rate hike may have frightened investors away from Tesla even more because it lowers the value of future earnings that are discounted back to the present in model estimates.