Tesla, Inc. TSLA shares are trading at their lowest level in two years, weighed down by a host of factors.
What Happened: Tesla shares have been on a downhill slide since the start of the year. The stock scaled a fresh peak of $414.50 on Nov. 4, 2021, as the post-pandemic buying spree proved positive for demand.
Come 2022, macroeconomic uncertainties and supply chain disruptions began exerting downward pressure on the stock. Tesla was forced to close its Giga Shanghai factory for about a month in April due to the COVID-19 resurgence in China. Even after the lifting of lockdown restrictions and the resumption of production, the ramp-up was slow. Tesla’s China factory produces roughly one-half of its global output. The factory was shut once again in July for renovations, which impacted production.
Demand for EVs also slowed as consumers were left to grapple with persistently high inflation and a rising interest rate environment. Tesla reacted to the development by announcing a price cut for its made-in-China vehicles in late October.
Another factor that had a strong negative impact was Tesla CEO Elon Musk’s purchase of Twitter and the months of uncertainty that prevailed in the run-up to the sealing of the deal.
Tesla investors, for one, feared the impact of Musk’s divided attention on his flagship electric car venture. They also dreaded stock sales by the billionaire to finance the purchase and fund operations, which could have a depressing effect on the price.
Tesla stock settled Friday’s session at $180.19, down 1.63%, according to Benzinga Pro data. This marks the lowest level since November 2020.
Analysts Say Problems Transitory: Despite Tesla shares’ current predicament, analysts are hopeful that things will turn around. The EV maker is the front-runner, having a competitive moat and strong mind share among consumers.
When the uncertainties clear up and the Twitter overhang lifts, Tesla shares could be in the for a strong rebound, analysts opine.
Gary Black, a Tesla bull and the founder of Future Fund, said shares could reverse course if the company increases volume in the fourth quarter without an accompanying price cut, ad revenue stabilizes at Twitter and Tesla announces a $10 billion stock buyback.
$1,000 Investment In Tesla: Cathie Wood, another Tesla bull, announced in April a new price target of $4,600 per share for the EV maker by 2026, premised primarily on the prospects for the robotaxi service.
An investment of $1,000 in Tesla at the current price would fetch 5.6 shares. The same 5.6 shares would be worth $25,760 if Wood’s 2026 Tesla price target is hit. This implies a 2,476% return on investment.
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