If you are one of the many people wondering Why Tesla Stock is down today, you’re not alone. The stock has taken a dramatic tumble over the last week, and the EV demand growth trajectory is slowing. As we discussed earlier, a chip shortage and logistical issues have dampened demand growth, but Tesla continues to dominate the market and have a solid earnings beat. In addition, a new demand step in China has given the company an opportunity to boost its business. Analysts at UBS have a buy rating on the stock and a $1200 price target.
The recent interest rate hike by the Federal Reserve is likely one of the reasons. While the move is intended to prevent inflation, it will likely slow the economy’s growth, causing fears of recession. Tesla shares will likely follow in the same direction. Elon Musk, who is now the largest shareholder in Twitter, is also CEO of SpaceX and Twitter. If Tesla shares fall, we could see a dramatic change in his stock prices.
In fact, Tesla’s China business probably played a key role in the Q3 2021 deliveries. The EV market in China has been booming and Chinese players have had much less trouble securing chip supplies. In fact, Tesla’s Shanghai facility accounts for over 40% of the company’s current production capacity. While there are risks to the business model, the company’s recent results show that it’s a very safe bet that Tesla can keep its market share.
The stock price has been flat since the company’s IPO in 2010. The stock had been falling since then due to a near-death experience in 2008. At the time, Tesla had only been selling one car. Their business plan was to keep the lights on long enough to launch the Model S sedan. However, as the Model S market dominated the EV market in Europe, Tesla has fallen behind competitors and is now facing a fierce competition from GM.
The decline in Tesla stock is surprising given its record growth in recent years. Although the company is a pioneer in the electric vehicle market, it has not been immune to the market’s volatility. The stock is now down more than 30% in just the last 18 months. However, the market may continue to decline. The market has been shaky for several weeks, and Tesla shares have fallen less than any other EV in the world.
However, if Tesla’s strategy isn’t changed, the company may face greater competition in the near future. The company has already fallen behind its goals set three years ago, and will have to compete with more EVs and improve its profitability. While the company was able to dominate the EV market for some time, it is now struggling to remain profitable, and Volkswagen is outselling Tesla in Europe. This could hurt Tesla’s valuation.
After a strong start to the week, the stock is off to a rocky start today. After a strong rally on Thursday, the company has already lost much of its gains. Elon Musk’s latest tweet about the company’s profitability has prompted investors to consider other factors that could hurt Tesla’s earnings in 2022. However, while the stock was up on Thursday, it is down 2.9% today. This is a reversal of the gains from Cyber Rodeo.
A large part of the reason for the shaky start is that Tesla hasn’t released a new EV model yet. The Cybertruck is not due to be released until 2022, so the company’s focus will be on increasing production volumes on existing models. As a result, it’s unlikely to hit the full-year target of two million vehicles. However, the company’s new factories in Austin and Berlin will help alleviate this problem. In fact, the Berlin factory will produce a majority of Tesla vehicles for European customers, along with the Model Y crossover SUV.
While Tesla isn’t reporting its sales of its self-driving software, the company’s overall auto software revenue has been gaining in recent quarters. While Tesla does not break out its software sales, gross margins for its automotive business have been trending upward. The Q2 gross margins were 25.8% versus 18.7% a year ago. This suggests that attach rates for the software are on the rise. In addition, the company has increased the software price to $10,000, and has launched a $200 software subscription.