What weighs on stocks?


Tesla Motors CEO Elon Musk unveils a new all-wheel drive version of the Model S car in Hawthorne, California on October 9, 2014.

Lucy Nicholson | Reuters

Tesla shares fell as much as 8% on Friday morning. They have since rallied to end less than 4% lower as markets showed a dramatic rebound late on Friday, but stocks have still lost more than 15% of their value for the year and finished lower. of the $ 600 for the first time since December 4. .

Here are some of the biggest factors weighing on cult stocks and taking the world’s richest crown away from Elon Musk: The CEO owns about 22% of Tesla shares.

Fed fears

On Thursday, Fed Chairman Jerome Powell said “upward pressure on prices” and “temporary increases in inflation” could hit the United States as the economy reopens after a year of restrictions on prices. Covid that affected companies in all areas.

The market is now worried that interest rates will go up, and the feds will not take aggressive political action or even be able to control it. Bond yields are increasing.

This is causing a broader correction in technology stocks, which are valued based on the assumption of strong growth in future cash flows. As inflation increases, the value of those future cash flows decreases. As previously reported by CNBC, the Nasdaq 100 list of the 100 largest non-financial stocks on the stock market is down 8% from the all-time highs reached three weeks ago.

This is affecting most of the tech giants. For example, Apple is down from about $ 129 to $ 121 so far this year, and Netflix is ​​down from about $ 523 to $ 516. But Tesla’s decline is more precipitous, so far.

Rivian R1T Pickup

Rivian

Bulls recognize the competition

Some of Tesla’s biggest and vocal backers have cashed in on their shares and have begun to recognize the onslaught of EV competition as a real challenge for Tesla at last.

For example, Ron Baron sold 1.7 million Tesla shares and invested in two of the company’s biggest potential rivals, GM-owned Cruise and Rivian, backed by Amazon, while paradoxically he said he expects Tesla shares to Tesla eventually rise to $ 2,000.

Former Tesla board member Steve Westly said on CNBC’s Power Lunch this week that while he remains optimistic, “Tesla is not going to be king of the hill in electricity forever.” He added: “They are receiving competition from all sectors. They will have to double to compete.”

In fact, automakers, including Ford and Volkswagen, have had early success with sales of their electric vehicles, including the Mach E and ID.3, versus Tesla models in the US and Europe. .

Meanwhile, upcoming electric vehicles – including the all-electric version of Ford’s F-150, the Lucid Air, Rivian’s electric SUVs and trucks, and others – are sparking excitement. Just yesterday, Porsche showed the production version of its Taycan Cross Turismo and said it would start selling in the United States this summer. It’s a $ 90,000 electric vehicle, a more affordable and practical version of Porsche’s performance electric vehicle, the Taycan.

An image of a CPU socket and motherboard on the table.

Narumon Bowonkitwanchai | Moment | fake images

Parts shortage

Semiconductor shortages have caused most automakers to temporarily shut down some lines at their factories, and Tesla is no exception.

Tesla CEO Elon Musk acknowledged that the company’s Fremont, California plant was temporarily closed due to a “parts shortage” in a tweet on February 25. He said it was closed for only two days, but did not clarify whether partial closures on some lines would continue.

Tesla had previously warned, in its fourth quarter 2020 results presentation and presentation, that chip shortages could hamper its vehicle production targets in the first half of 2021.

CFO Zachary Kirkhorn said in the call with investors that for the first quarter of 2021:

“[Model] Production of S and X will be low due to transition to newly redesigned products. In addition, we are working very hard to manage the global shortage of semiconductors, as well as the capacity of the ports, which may have a temporary impact. “

If Tesla does not produce a large volume of vehicles, due to parts shortages or delays in shipping parts from abroad to its US plants, the company would not generate as many regulatory credits as it would like. Tesla sells these environmental credits to other automakers, which is how it has historically achieved profitability.

The freight traffic hub in the Gruenheide region of East Berlin. Tesla plans to build its new European Gigafactory in a huge nearby forest.

Patrick Pleul | image alliance via Getty Images

More pronounced expenses

Controlling costs has been on CEO Elon Musk’s mind for years.

In December 2020, he wrote in an email to all Tesla employees: “Investors are giving us a lot of credit for future returns, but if, at any point, they conclude that this is not going to happen, our shares will be crushed immediately. like a souffle under a mallet! “

But at the same time, Tesla finds itself in an expansion rip that will cost it handsomely. The electric vehicle maker is building factories in Austin, Texas, in Brandenburg, Germany and expanding its presence in China. It has also embarked on renovating aspects of its Fremont facility, including the paint shop, the area of ​​the factory where its cars are painted.

Musk also has ambition for Tesla to mine its own lithium, domestically. And increase production of Tesla’s own battery cells at a pilot plant also in Fremont.

In addition to these efforts, the company is in the midst of costly recalls and could face more, whether voluntary or mandatory. Most significantly of these voluntary recalls, in China and in the US, Tesla is recalling Model S and X vehicles that experience touchscreen failures.

– Jessica Bursztynsky contributed to this report.

Correction: Tesla ended up down 3.78% on Friday.

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