Tesla Aims for a Reversal – Shares Red Again, Long Term Holders Have Different Viewpoint

The electric vehicle (EV) pioneer, Tesla Inc. (TSLA)‘s shareholders have been on a bumpy ride this last year. Tesla shares have had a volatile journey, shedding more than 30% this year as the company battles with changing sentiment for EVs, and a more competitive landscape in certain key markets.

Shareholders, and analysts remain glued to Tesla, waiting to see if Elon Musk can steer back onto the growth track after some earlier years of staggering success. We take a closer look at what has been going on under hood at TSLA.

Battlegrounds and sentiment shift

The roadblocks to Tesla's stock performance are multi-pronged. A combination of softer demand for EVs, intensified competition within the sector, and strategic price reductions by Tesla have pressured the stock. In an industry that's becoming increasingly crowded, Tesla's move to lower average selling prices was a bold strategy to maintain market dominance, but not without financial implications.

Adding to the concerns was a cautious outlook for the year ahead, delivered by Tesla's leadership. With a forecasted volume decrease falling short of the company's ambitious growth target of 50%, Tesla is refocusing its efforts on innovation, specifically the development of a next-generation, low-cost EV.

Tesla's first quarter of 2024 provided concrete evidence of the challenges ahead—Tesla delivered 386,810 vehicles, missing analyst expectations of 425,000 units. This marked an 8.5% decline year over year, compounded by a trifecta of production hurdles, weakened demand, and fierce competition from new and existing players in the EV space.

Despite these setbacks, Tesla remains a global leader in electric transportation. The company's brand recognition, underpinned by technological prowess and substantial manufacturing capabilities, has not wavered, securing its spot at the forefront of the industry.

A silver lining in Tesla's financial fabric has been the company's ability to decrease the cost of goods sold (COGS) per vehicle. In the fourth quarter of 2023, the COGS per vehicle stood slightly above $36,000. This metric points towards enhanced cost efficiencies and a stronger competitive position against rivals.

Keen to take the driver's seat in the EV race, Tesla is relentlessly pushing to expand its production footprint, drive down costs further, enhance vehicle features, and innovate in AI-driven technologies. Their Energy Generation and Storage division has also become a beacon of growth, with profits nearly quadrupling in 2023—signaling Tesla's diverse potential beyond EV manufacturing.

However, opinions on Tesla's stock are mixed among analysts, with recommendations swinging from “Strong Buy” to “Strong Sell.” The average price target of $196.37 implies a modest 11% upside potential. A divided forecast reflects the uncertainty and contrasting theories on the company's ability to navigate current headwinds.

Is there an element of profit taking in TSLA?

It is worth remembering for all the apparent gloom, the amazing trajectory that Tesla stock has taken. Depending on when you first started following TSLA, you will likely have very differing views on the performance.

For those who would have followed Tesla shares over the past 2 years, there would be a notable 50% decrease in value, and an apparent shift in focus from the man in charge. At the beginning of April 2022, (allowing for adjustments based on share splits) TSLA began the quarter at a mark of $361.53. Accounting for the pre-market session today, TSLA shares now sit a slither above $170. That is a 53% swing… in the red.

Taking the same point in 2022 and looking back however gives a totally different dynamic. At the beginning of April 2020, Tesla shares were changing hands at $32. That represents a difference of +1129%.

Getting in and out of a stock at the perfect time is going to be nigh on impossible for most of us humans, but for those that have a longer term outlook may still be sitting pretty on Tesla. The last 5 years represents 862.24% growth, and that for those early to the stock will be a huge thumbs up.

Some shareholders may have seen the last 2 years of sideways, and sometimes downward trading as a time to take profits off the table, whilst others may have seen it as a time to add to their holdings.

For believers in Tesla's long-term narrative, the current stock pullback might appear as an attractive entry point. Tesla's technological edge and competitive advantages in the EV industry are expected to play a pivotal role in its rebound story.

Nevertheless, as with any investment, the potential for resurgence comes with its own set of risks in the dynamic and ever-evolving landscape of electric vehicles. Stakeholders will be watching closely to see if Tesla can recharge its momentum and take the market by storm once again.