Tesla shares are falling. 4 reasons why


Actions of Tesla (TSLA) It fell 6% on Tuesday after closing 8.5% on Monday, erasing its gains for the year. The stock closed at a record just above $ 883 on January 26 and has been down since. It fell to $ 619 on Tuesday, the first time Tesla shares fell below $ 700 since Dec. 31.
Tesla announced earlier this month that it had invested $ 1.5 billion in bitcoin. That helped fuel the recent rally in bitcoin, and by some estimates Tesla made a quick $ 1 billion profit, more than it has ever made selling cars in a single year.
But on Saturday, in response to a critic of Tesla’s bitcoin investment, Musk tweeted that the prices of both bitcoin and another cryptocurrency called Ether “seem high.” That helped send the price of bitcoin (XBT) It was down 9.3% in trading Monday, which may have helped drag Tesla stock down.

“Bitcoin is the smart move at the right time for Tesla in our opinion, but on the downside it is playing with firecrackers and risks and volatility add to the Tesla story,” said Daniel Ives, technology analyst at Wedbush Securities , who remains bullish on Tesla Stock.

Y model prices

Last Thursday, Tesla cut the price of the cheapest version of its Model Y and its best-selling Model 3 by $ 2,000 each. That raised the price of the “standard range” Model Y, one that can travel 244 miles on a charge, to $ 38,490 – and the standard range Model 3 to $ 34,590.

But over the weekend, the cheaper “standard range” version of the Model Y disappeared from Tesla’s sales site, leaving only the more expensive long-range and performance versions of the SUV. Tesla did not explain his decision.

“We see the plausible reasons as: either the combination leaned too far towards the cheaper variant and was therefore going to kill their margins, or most likely there simply wasn’t much demand for the lower variant,” Gordon Johnson said. from GLJ Research, one of the most bearish critics of Tesla stocks. He said recent price cuts and other price cuts show that Tesla vehicles are not in demand that their fans claim.

“Tesla cannot keep its current factories running at capacity without … price cuts,” Johnson said in a note Monday.

Increased competition

Recently established automakers have set ambitious targets for their own EV sales.

General motors (GM) launched an SUV version of its Chevrolet Bolt a week ago, priced well below the Model Y, and announced that it intends to sell only emission-free cars after 2035. Ford (F) It set an even more ambitious electric vehicle target for its sales in Europe, saying that all the car models it sells there will be electric vehicles by 2030.
Apple (AAPL) It is also considering partnering with an automaker to enter the auto business, according to various news reports.

Those efforts are making some Tesla investors nervous, Ives said, though he believes there will be enough shift toward electric vehicles for multiple winners among global automakers.

Investors were ahead of themselves

Tesla shares peaked a day before a disappointing earnings report on January 27 that fell short of Wall Street analysts’ forecasts.
The earnings showed that the money Tesla made from selling regulatory credits to other automakers exceeded its overall net income. Critics, such as Johnson, said it’s proof that Tesla can’t make money building and selling cars (although by other profit measures, Tesla is profitable).

During the earnings conference call on Jan.27, Musk also spoke about a shortage of batteries needed to power electric vehicles. He said that even with Tesla’s internal supply of batteries and its planned expansion of battery production, the company is struggling to find the batteries it wants to build more vehicles.

“The fundamental limit of electric vehicles at the moment, in general, is the total availability of [battery] cells, “he said. For example, Musk said that Tesla would have already started producing a semi-trailer if it had the batteries available to do so.

Stocks keep rising

Shares of Tesla were up a market-leading 743% in 2020 as investors embraced the idea that the future of the auto industry would be electric. Tesla remains by far the most valuable automaker in the world, with a market value far greater than the eight largest automakers combined.

Even with the recent decline. Shares of Tesla have risen about 1,300% since October 2019, when it reported a third-quarter profit that surprised investors, causing the shares to spill.

Some investors believe that Tesla shares soared too high. However, many analysts believe that Tesla will rebound. Ives has a 12-month price target of $ 950.

Still, he has a caveat: “It’s ‘time to buckle up’ again for Tesla stocks with more volatility on the horizon,” Ives said.

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