Tesla’s stock price has plunged by 40% since late 2024, with the decline accelerating in recent days, reports Bloomberg. The drop was triggered by reports that the company’s electric vehicle sales in Europe nearly halved.
Over the past week, Tesla shares have fallen by 17%, raising concerns among traders about the slowdown in the company’s core automotive business. This is particularly alarming because Tesla's stock price is driven as much by investor enthusiasm as by financial fundamentals.
Steve Sosnick, Chief Strategist at Interactive Brokers, commented:
"The real challenge with a stock as highly valued as Tesla is determining the bottom. Since Tesla has long defied traditional valuation metrics, its stock is more influenced by investor sentiment than by fundamental analysis."
Tesla has been facing increasing difficulties in 2024. Following the U.S. presidential election, Tesla shares initially surged as investors speculated that Elon Musk might benefit from closer ties with President Trump. However, confidence faded in January after Tesla reported disappointing Q4 delivery numbers and its first annual sales decline in over a decade.
Later, a weaker-than-expected earnings report and a lower 2025 sales forecast further damaged investor sentiment.
As a result, Tesla’s market value fell below $1 trillion, making it worth less than Berkshire Hathaway and Broadcom.
For now, analysts see no immediate catalyst for a rally. There are no major updates expected regarding Tesla’s full self-driving (FSD) vehicle plans, which remain a key factor for long-term investors.
Another major concern is Musk’s increasing political involvement, which has worried investors who believe he should focus more on Tesla’s operations.
Tesla's high stock valuation is also a risk factor. The stock trades at 92 times forward earnings, much higher than the S&P 500 average of 21 and the 28 average of other large-cap tech firms.
Tesla’s recent decline coincided with a broader market pullback, as the S&P 500 fell by 5% from its all-time high earlier this month.
Given these challenges, some investors are hesitant to buy the dip, believing that Tesla’s stock may not have bottomed out yet.
One key indicator—the implied skew in Tesla’s options market—turned bearish last week for the first time since November, suggesting that traders are hedging against further declines.
On Thursday, Tesla shares fell by over 3%, hitting a low of $280, the weakest level since November 6. However, in Friday pre-market trading, shares rebounded slightly by 0.4%.
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