Tesla (NASDAQ:TSLA) stock fell almost 5% in pre-market trading today as investors processed news it is temporarily suspending production in Shanghai, China, and planning for reduced output from the factory in the new year.
Tesla stock falling is no longer news. It is down 32% in the last month and 70% for the full year. The stock opened at about $117 per share, representing a market capitalization of less than $370 billion.
All car stocks are down this year. General Motors (NYSE:GM) is off 42% in 2022. Ford (NYSE:F) has lost 45% of its value this year. Even mighty Toyota (NYSE:TM) is down 25%. Tesla is getting the headlines because it fell from a $1 trillion market cap and because it may have further to go.
What’s Going on With TSLA Stock?
Tesla still has defenders. Auto engineer Sandy Munro, once a critic, is now a super bull. Analysts like Ross Gerber are certain Tesla stock will rise again if CEO Elon Musk just gets back to making cars.
There are still reasons to like Tesla. The company is selling its demonstration units due to high demand. Inventories are falling. The company still predicts growth of 50%, with fat margins from not having to advertise.
But trouble is piling up. Prices of used Teslas are falling. The company is discounting its prices. Its reputation has tanked along with that of the CEO.
Tesla stopped reporting quarterly safety statistics last quarter. Negative anecdotes, like the vehicles bursting into flames or refusing to charge in cold weather, are going viral.
The headwinds are too much for some analysts, who are dropping their support. Even at its present level, Tesla is worth seven times more than GM or Ford, which both still have twice its revenue. That’s thanks to growth and operating margins that topped 17% in the last quarter.
Tesla is opening its Texas factory next year, and there are plans to build another in Mexico. Musk has talked of building a new factory each year to produce 20 million vehicles in 2030.
What Happens Next?
Tesla is trying to report a great fourth quarter next month. If the numbers are good enough, critics will scatter. But it’s still hard to call the stock underpriced. The reality distortion field of Elon Musk is dissipating, the way a high time turns into a hangover after the lights go out.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
