Tesla Faces Challenges as Its Stock Drops Significantly

Elon Musk's Tesla, which once looked like it was going to lead the car industry into a bright, electric future, is now facing some serious troubles.

by Faruk Imamovic
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Tesla Faces Challenges as Its Stock Drops Significantly
© Getty Images/Justin Sullivan

Elon Musk's Tesla, which once looked like it was going to lead the car industry into a bright, electric future, is now facing some serious troubles. The company, which was part of the so-called "Magnificent Seven" big tech companies, has had a really tough year.

In fact, it's the worst performer in the S&P 500, with its value dropping almost 32% since January. The reasons behind Tesla's struggles are many. From problems with car safety and recalls to slowing down in how fast it's growing, Tesla has had to cut prices to try to keep up.

A recent report by Colin Langan, an analyst at Wells Fargo, goes even further, saying Tesla is a "growth company with no growth." Langan isn't optimistic about Tesla's future either. He thinks the company won't grow much this year and might even start to do worse in 2025 because it faces more competition, might not sell as many cars as hoped, and could have to cut prices again.

Feeling the Heat from Competitors and Slowing Demand

The electric car market is changing fast, and it's not in Tesla's favor. The same day Langan shared his gloomy outlook, UBS also lowered its expectations for Tesla. They're worried because people aren't as eager to buy electric cars as before, and car makers from China are getting a bigger piece of the market.

This is a big contrast to the other big tech companies in the "Magnificent Seven," like Apple, Amazon, Meta, Google, Nvidia, and Microsoft. All of them did really well at the end of 2023, but Tesla's profits went down by 40% compared to the year before.

Tesla is trying to make it through a really tough time. The competition in the car market is getting fiercer just as people are starting to ask hard questions about how much Tesla is really worth. The price of Tesla's shares has dropped about 60% from its highest point in 2021.

Even after this drop, Langan thinks Tesla's shares are still too expensive compared to how much money the company is actually making. Wells Fargo has lowered its guess of what Tesla's shares should be worth from $200 to $125, thinking they'll lose even more value. UBS is a bit more hopeful but still cut its price target for Tesla from $225 to $165.

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