Tesla is having a tough year. Is it a buying opportunity or a warning sign?
After soaring through 2023; tesla's (TSLA -1.92%) In 2024, fate will suddenly change.
EV stocks were the worst-performing stocks of 2019. S&P500 The first quarter was plagued by disappointing earnings reports, lower prices in the EV industry and widespread concerns about high interest rates weighing on demand.
Stocks continued to fall in April, as Tesla reported a weak 9% year-over-year drop in first-quarter car deliveries and took the surprising step of laying off 10% of its workforce later that month. Stocks have fallen 11% over the past week and are hovering near 52-week lows, while the S&P 500 index is near all-time highs.
So, is it a good idea to buy Tesla during a downturn? Before we answer that question, let's take a look at the company's current situation.
Image source: Tesla.
Tesla in transition
Since Tesla stock began making profits and skyrocketing in 2020, its valuation has been much higher than that of its traditional automaker peers. Even after the recent crash, Tesla is worth $500 billion, making it one of the most valuable stocks in the country and several times more valuable than similar peers. general motors and ford.
However, Tesla is currently facing challenges on a number of fronts. Vehicle deliveries in the first quarter not only fell, but were also significantly lower than production, indicating weaker demand. The company has not yet announced its first quarter results, but profits are likely to decline significantly due to falling prices due to intensified competition in the EV industry.
Additionally, media reports say the company is pausing development of its mass-market Model 2 so it can focus on robotaxis and fully self-driving technology.
Tesla has also laid off more than 10% of its workforce, another indicator of the overwhelming lack of demand, and two key executives involved in battery and car manufacturing are leaving the company. Stated.
Is Tesla a buy after falling 37% this year?
As EV sales struggle due to increased competition, weak demand and high interest rates, Tesla is pinning its hopes on robotaxis and fully self-driving technology.
CEO Elon Musk said the company would unveil its robotaxis on Aug. 8, but the company is also known for delaying promises and product releases, and Musk has said that such things can happen when things are tough. There is a pattern of using promises.
Tesla's robotaxis have the potential to be a game-changer for the company, but even if Tesla launches them in August, regulations will likely make a full rollout difficult.
Self-driving cars were predicted to become mainstream several years ago, but regulatory pressures, safety concerns, media scrutiny and other issues kept this from happening.
However, Tesla isn't the only company working on self-driving technology. alphabetWaymo has accumulated millions of miles of unmanned transportation and is currently actively transporting passengers in San Francisco, Los Angeles, and Phoenix. general motorsCruz also operated in San Francisco, but regulators recently removed it from the roads due to too many violations. Other technology and automotive companies are making great strides in self-driving as well.
Tesla remains expensive, even though its core growth story of EV sales appears to be on hold, at least as long as both deliveries and prices continue to fall.
For the stock to recover, either a return to strong growth in EV sales and profits or an explosive presentation of robotaxis will be needed, as self-driving capabilities are already factored into the stock price.
Given the current economic environment and widespread headwinds in the electric vehicle sector, it seems likely to lose. It's probably best to avoid Tesla stock at this point.
Suzanne Frey, an Alphabet executive, is a member of the Motley Fool's board of directors. Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Tesla. The Motley Fool recommends General Motors and recommends the following options: Long January 2025 $25 Calls on General Motors. The Motley Fool has a disclosure policy.
