After soaring through 2023, Tesla‘s (NASDAQ: TSLA) fortunes have suddenly changed in 2024.
The EV stock was the worst-performing stock on the S&P 500 in the first quarter, plagued by a disappointing earnings report, price cuts in the EV industry, and broader concerns about high interest rates weighing on demand.
The stock continued to slide in April as Tesla reported weak first-quarter deliveries, which were down 9% from the previous year, and it made the surprising move of laying off 10% of its workforce later in the month. The stock is down 11% in the past week, hovering near a 52-week low at a time when the S&P 500 is near an all-time high.
So is it a good idea to buy Tesla on the dip? Let’s take a look at where the company is today before we answer that question.
Tesla in transition
Ever since Tesla stock skyrocketed in 2020 when it became profitable, the stock has had a much higher valuation than its traditional automaker peers. Even after the recent sell-off, Tesla is valued at $500 billion, making it one of the most valuable stocks in the country, and several times more valuable than peers like General Motors and Ford.
However, Tesla is now facing challenges on multiple fronts. Vehicle deliveries were not only down in the first quarter, but also significantly short of its production, indicating weakening demand. While the company hasn’t yet reported first-quarter earnings, profits are likely to be down significantly as prices have fallen due to increasing competition in the EV industry.
Additionally, media reports said that the company is putting the development of its mass market-priced Model 2 on pause so it can it focus on its robotaxi and full self-driving technology.
Tesla is also laying off more than 10% of its workforce, another indicator that demand is underwhelming, and two key executives involved with battery and vehicle manufacturing said they were leaving the company.
Down 37% this year, is Tesla a buy?
With EV sales struggling amid increasing competition, weakening demand, and high interest rates, Tesla is pivoting its hopes to its robotaxi and full self-driving technology.
CEO Elon Musk said the company would unveil its robotaxi on August 8, but the company is also notorious for delaying its promises and product releases, and Musk has a pattern of using such promises when it’s struggling.
Tesla’s robotaxi has the potential to be a game-changer for the company, but even if Tesla does launch the robotaxi in August, regulation is likely to make a full roll-out challenging.
Autonomous vehicles were predicted to go mainstream several years ago, but that didn’t happen due to regulatory pressure, safety concerns, and media scrutiny, among other issues.
However, Tesla isn’t the only company working on self-driving technology. Alphabet‘s Waymo has racked up millions of miles of driverless transportation and is now actively ferrying passengers in San Francisco, Los Angeles, and Phoenix. General Motors‘ Cruise was also active in San Francisco until regulators recently pulled it off the road after too many infractions. Other tech and auto companies have also made significant progress in autonomous driving as well.
Tesla is still priced at a premium even though the core growth story, selling EVs, appears to be on hold, at least as long as deliveries and prices both keep falling.
A recovery in the stock will take a return to solid growth in EV sales and profits or a blowout presentation of the robotaxi, as autonomy is already priced into the stock.
In the current economic environment and with the broader headwinds in the electric vehicle sector, that looks more likely to be a losing bet. Tesla stock is best avoided at this point.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for two decades, Motley Fool Stock Advisor, has more than tripled the market.*
They just revealed what they believe are the 10 best stocks for investors to buy right now… and Tesla made the list — but there are 9 other stocks you may be overlooking.
*Stock Advisor returns as of April 15, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the 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.
Tesla’s Stock Price Just Plunged. Is Now the Time to Invest? was originally published by The Motley Fool
Source link
