Another big drop! The 'King' Tesla falls from grace.
On April 15 (local time), the sluggish$Tesla(TSLA.US) fell another 5.59%, with its stock price already pressed to the lower edge of the consolidation platform.
Looking at a longer timeframe, from its peak on November 4, 2021, to now, Tesla's stock price has cumulatively dropped by 60%, making it the worst performer among large-cap tech stocks in the U.S. market.
Poor Sales, Tesla Announces Layoffs
Tesla's stock slump is due to both financial factors and market sentiment.
On one hand, large-cap tech stocks in the U.S. market have been favored by investors over the past two years, but Tesla has been left out this time. The stocks that have surged are AI-related companies, including $NVIDIA(NVDA.US), Microsoft, TSMC, and others.
With funds flooding into AI concept stocks, Tesla, the leader in electric vehicles, has inevitably been neglected.
On the other hand, Tesla just experienced a quarter of declining sales.
Data shows that in Q1 2024, Tesla's deliveries fell 8.5% year-over-year to approximately 386,800 units, a drop of over 20% quarter-over-quarter. This marks the first quarterly decline in deliveries in four years, far below analysts' previous estimates. Production in Q1 was 433,400 units, also below expectations.
In the Chinese market, $BYD(002594.SZ) launched a new round of price wars in Q1, with Wuling, Beijing Hyundai, and $CHANGAN AUTOMOBILE(000625.SZ) following suit.
Faced with the aggressive push from domestic new energy vehicle makers, Tesla is under significant pressure. Data from the China Passenger Car Association shows that Tesla's market share in China has dropped from double digits to single digits.
The impact of declining sales is comprehensive.
Recent reports indicate that Tesla has adjusted working hours at its Austin Gigafactory, reducing the original 12-hour two-shift system to 11 hours for the day shift and 10.5 hours for the night shift. This factory produces the Cybertruck and Model Y and is also the R&D base for Tesla's next-generation vehicles.
Additionally, the Shanghai Gigafactory has reportedly been cutting production, with employees being told to reduce working hours.
However, Tesla seems to think this isn't enough.
The latest reports reveal that on April 15 (local time), Elon Musk sent a company-wide email announcing that Tesla will lay off 10% of its global workforce.
Data shows that as of the end of 2023, Tesla had 140,000 employees worldwide. This layoff will affect approximately 14,000 people.
Hiring and layoffs are normal for companies, but Tesla is highly scrutinized, and this layoff news, coming at a time of declining sales, is bound to have an amplified impact.
FSD Price Halved: Is Musk's Plan Reliable?
It's worth noting that amid Tesla's recent setbacks, Musk and some executives have disagreed.
Some Tesla executives and investors believe that the $25,000 budget model is the "big move" to save Tesla's sales and stock price.
However, Musk seems more focused on Tesla's Robotaxi and FSD (Full Self-Driving) system. FSD is also a critical component for the success of the Robotaxi project.
If Tesla users subscribe en masse to its FSD software, it could improve Tesla's profit margins and regain Wall Street's favor.
Recently, Tesla rolled out FSD (Supervised) to all users in North America (including the U.S. and Canada), removing the "Beta" label for the first time, suggesting that Tesla's three-year FSD Beta testing program may have ended.
However, it was recently reported that Tesla has adjusted the monthly subscription fee for its overseas FSD system, reducing it from $199 to $99—a 50% cut.
Analysts suggest that Musk is doing this to boost the adoption of its autonomous driving assistance system ahead of the Q1 earnings report.
In the long run, the price cut could accelerate FSD adoption, allowing Tesla to gather more data to train its neural networks, improve the product, and benefit the Robotaxi project.
However, the significant price cut for FSD may negatively impact profitability in the short term, and FSD was already seen as a key driver for improving performance.
Analysts Cut Target Prices
Notably, a few years ago, when Tesla's stock was soaring, institutions were bullish, painting a rosy picture. But after recent setbacks, Tesla has fallen from grace, with multiple research firms cutting their target prices.
Bank of America maintained a "neutral" rating on Tesla but slashed its target price from $280 to $220—a 21% reduction.
However, Tesla's current stock price is only $161.48, even lower than Bank of America's revised target.
Wells Fargo lowered Tesla's target price from $125 to $120.
Citigroup also maintained a "neutral" rating but reduced its target from $196 to $180.
Overall, Tesla and Musk are indeed going through tough times, and their next moves are worth watching.
Author: Yan Shisi
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