Tesla Stock Retains Long-Term Potential Despite Growing List of Concerns

Tesla (NASDAQ:TSLA) has had a rougher year in 2022 than many companies, at least in terms of stock performance. A wide range of factors is weighing on the market, resulting in broad pullbacks. However, at this point, after closing out last week with two more steep declines, TSLA stock is down 33%. What’s going on that Tesla has lost a third of its value in just over three months? Is this a sign of deeper problems, or a chance to pick up shares while they are relatively affordable?

Tesla (TSLA) Motors Assembly Plant in Tilburg, Netherlands.

Source: Shutterstock

After soaring to record highs through 2021, the first big sign of trouble for TSLA stock came in mid-November. When CEO Elon Musk sold $5.7 billion worth of his Tesla shares, the stock dropped 15.4% in one week.

That was its worst one-week performance in nearly two years. More news was yet to come, with a series of headlines that raised further concerns — and continued to knock down TSLA stock. Here’s an overview of the concerns that have Tesla shares sliding.

TLSA Stock Faces Numerous Headwinds

When Tesla reported its fourth quarter earnings in January, the company warned that ongoing supply chain issues will continue to hobble production this year. Tesla warned investors: “Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022.”

Predictably, the bad news sent TSLA stock down, despite a quarter that beat analyst projections.

Another issue weighing down Tesla this year is problems surrounding its Cybertruck. The global shortage of computer chips may have an upside for semiconductor stocks, but it has been bad news for Tesla. With no end in sight to the chip shortages, Tesla announced it would not be launching any new models in 2022. That means the Cybertruck — its eagerly anticipated electric pickup truck — is delayed until at least 2023.  

War in Ukraine Threatens Semiconductor Industry 

The chip shortage has been bad for automakers, including Tesla. And the war in Ukraine is now threatening to make the situation even worse. Neon gas is a critical component used in the manufacture of semiconductors, and Ukraine is a leading supplier with 70% of the world’s supply of neon. Even worse, Russia is another leading supplier of Neon gas. Russia is also a primary source of palladium, a metal used in electronics. The war puts those sources in jeopardy.

Furthermore, nickel is a crucial component in making EV batteries. The surge in demand for EVs already had nickel prices skyrocketing, then Russia invaded Ukraine. With Russia supplying over 11.3% of global nickel production, prices are now stratospheric. This makes EV batteries even more costly and it’s likely to make EVs more expensive. There could ultimately be battery production delays because of nickel shortages. 

Tesla’s Plans for Producing Its Own Batteries Seem Optimistic

Tesla CEO Elon Musk had been promising the company would ramp up production of its own 4680 batteries this year. The batteries hold five times the energy of its current EV batteries, which are sourced from other manufacturers. This would allow the company to put smaller batteries in its cars while keeping the same range, significantly lowering costs. Musk had said that in 2022 the company would have the capacity to produce enough 4680 batteries for 1.3 million cars.

At this point, it’s looking like mass production won’t really be possible until 2023. 

Bottom Line on TSLA Stock

One notable plus for TSLA stock through a year that has been full of challenges and concerns is its German gigafactory. The $5.5 billion plant had faced a series of regulatory delays, but on March 4, the company was given the go-ahead to begin construction. When complete, the gigafactory is expected to produce 500,000 Teslas yearly for the European market. 

Having so many variables in play, it should come as no surprise that analyst ratings for TSLA stock are all over the place. Checking in with the Wall Street Journal, TSLA has a consensus “overweight” rating. However, consensus is far from unanimous. With 43 investment analysts polled, there are seven with a “sell” rating, three with “underweight” and 11 who rate TSLA as a “hold.”

As for Portfolio Grader, plug the data in for Tesla stock and you’ll find it earns a “B” rating.

The bottom line on TSLA stock is that the pullback that has seen shares lose a third of their value in 2022 — and 35% from their all-time high levels of November 2021. This offers a unique buying opportunity. However, it comes with risk. That’s especially true during the short term.

Any one of the concerns weighing on Tesla stock could turn into a real problem, negatively impacting the company. Then there are the economic factors affecting all companies, including rising interest rates and inflation.

If you overlook the rocky road shares could be on for now, TSLA stock continues to offer a pretty convincing long-term growth prospect.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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