Tesla in turmoil: stock plunges on the market, what's the outlook?

The stock drops 24% in one month

The recent disclosure of Tesla's quarterly results sent shockwaves through the market, leading to a significant 12.1% drop in its stock on January 25th. The decline doesn't seem to be over: in just one month, the stock has given up nearly 24% of its value. Its price has fallen back below the $194 mark, last quarter's lowest threshold. This phenomenon could increase the selling pressure on the stock.

Surely, this degree of volatility is not new for the electric vehicle manufacturer. But this time, the event raises questions about its long-term viability.

The surprise is all the greater because the company's Model Y was the world's best-selling vehicle in 2023 (1.23 million units sold). However, despite the increase in sales, Elon Musk's company is suffering from surging competition which is driving down prices and forcing it to similarly reduce its margins.

The manufacturer forced to lower prices due to increased competition

In the 4th quarter of 2023, the brand thus posted a stagnant revenue (+1%) despite a strong increase in sales volume, a sign of a sharp drop in the manufacturer's rates. The operating margin has fallen by almost 8 points, dipping below the 10% threshold.

This trend could persist as competition intensifies. The electric car market is being disrupted by Chinese manufacturers, particularly through the BDY brand. Beyond the boom in their domestic sales and exports, European manufacturers are also benefiting from the sector's surge. Tesla has thus ceded its top spot in Europe to Volkswagen and Renault.

As a symbol of the democratization of electric cars, Tesla was therefore unable to achieve its main objectives in 2023. Investors seem to have taken note of this: the stock has fallen to the bottom of the S&P500 index.

The electric car market is booming, a rebound is possible

But despite the headwinds, Tesla could still surprise and demonstrate its resilience in the face of current challenges. The announcement of a new budget model thus raises expectations, and the brand's aura seems, for now, unscathed.
Moreover, factors such as the reduction in battery costs, increasing demand for electric vehicles, investments in artificial intelligence, or the development of solar power, could serve as positive catalysts for long-term investors.