This week is only half over and it’s already seen plenty of news regarding Tesla (NASDAQ:TSLA) stock.
From Elon Musk’s decision to accept Dogecoin (CCC:DOGE-USD) to the fatal crashing of a Model 3 taxi in Paris, France, there’s been plenty to keep the EV innovator in the public eye. Through it all, TSLA stock has been declining, but not because of the aforementioned reasons. Rather, the declines the stock has seen this week have been predominantly driven by external factors.
According to one industry expert, much of it can be traced back to the fact that the EV sector is facing a bumpy road in 2022.
What’s Happening With TSLA Stock
Today has been an interesting day for TSLA stock, which has just managed to shake off further losses. It began sliding steadily as markets opened, falling by more than 3%. Following an update from the Federal Reserve, though, Tesla shares are joining the broader stock market in the green.
Since these declines began, speculation has risen that the losses are due to Musk’s offloading of shares. He began this week by selling an additional $906 million worth of TSLA stock, bringing his total number of shares sold to 11.9 million. CNBC has reported that by the end of 2021, he could offload $18 billion worth.
Why It Matters
As it turns out, Musk’s share offloading may be part of a carefully calculated plan to preserve his wealth in the face of an uncertain economic future. Gene Munster, an analyst and managing partner from Loup Ventures, spoke to exactly that this morning. While he touted the shrewdness of Musk’s actions, he noted that they were likely driven by the fact that the EV sector’s growth was going to slow in 2022.
Munster added that it was rare for a sector to see the type of growth two years in a row that EV producers had enjoyed in 2021. While he maintained the price target of $2,500 that he had initially set for TSLA stock, he took a less bullish stance on some of Tesla’s peers, such as Rivian (NASDAQ:RIVN). Munster questioned the company’s high valuation, indicating that he saw it as an overvalued stock that was likely to fall.
While TSLA stock hasn’t responded poorly to this news, Munster makes a compelling case for the future of the EV sector. It’s worth noting that yesterday brought the announcement of another analyst’s report that forecast a tight year ahead for EV stocks. While Tesla is the undisputed leader within the sector, it will certainly be faced with challenges if the market for EVs slows its growth in the year ahead. If consumers are facing monetary constraints, they are likely to turn to more affordable options if and when they do purchase an EV.
What It Means for Tesla
The way it looks from here, the entire EV sector is facing a difficult year. That doesn’t mean that the EV race is over, but it does mean that we aren’t likely to see the type of exciting growth from EV stocks in 2022 that we got used to in 2021. Munster is still bullish on Tesla, predicting further upside despite this, but his note of caution is worth flagging.
So what is the bottom line? Investors should prepare for a fairly rocky road EV producers in 2022.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
