Tesla shares plunge 10% to start 2023 on weak demand worries

Tesla’s ongoing stock freefall stretched into the new year, with shares plunging an additional 12% on Tuesday after the electric car company failed to hit Elon Musk’s delivery targets amid sputtering demand.

Tesla was the worst-performing stock on the S&P 500 on Tuesday and lost nearly $60 billion in market value during the plunge. The stock closed at $108.10, down $15.08.

Even before the woeful performance to start the year, the company’s market cap plummeted a whopping 65% over the last 12 months as Tesla weathered supply chain problems, slowing demand in China and blowback over Musk’s controversial actions as head of Twitter.

Tesla sold off after reporting 405,278 vehicle deliveries in the fourth quarter, which marked an internal record but was still below the 432,117 that analysts expected, according to Refinitiv data. The tally marked a 40% year-over-year increase in deliveries at Tesla, but missed Musk’s 50% target.

Several firms cut their price targets for Tesla shares in response to the delivery report, a key metric since its the closest glimpse the company provides of its sales numbers.

Wedbush analyst Daniel Ives noted that Tesla had missed the 50% target in vehicle deliveries “by a country mile.”

“Demand overall is starting to crack a bit for Tesla and the company will need to adjust and cut prices more, especially in China which remains the key to the growth story,” Ives said.

Bernstein analyst Toni Sacconaghi noted that Tesla “is facing a significant demand problem” that could crimp its stock. He asserted that the company will likely need to reduce its growth targets or slash prices to boost demand.

“Many investors underestimate the magnitude of the demand challenges Tesla is facing,” Sacconaghi said.

Tesla’s valuation hovered below $340 billion as of Tuesday after once topping more than $1 trillion.

Production woes have intensified over the last few weeks as Tesla was forced to shut down its hub in Shanghai due to a local surge in COVID-19 cases. The Shanghai facility is expected to operate at a reduced clip in January.

Tesla has sought to offset a lack of demand from customers in China by offering major discounts.

Some Tesla investors have also turned a critical eye toward Musk’s increased involvement at Twitter, where he has served as CEO since closing the $44 billion deal to buy the social media platform in October. Musk has drawn scrutiny over his actions at Twitter, including high-profile clashes with advertisers, abrupt bans on journalists’ accounts and an overhaul of the site’s verification process.

The company’s recent struggles are the key factor in Musk’s massive loss of personal wealth. Tesla shares comprise the bulk of his sizable net worth.

The Tesla CEO became the first person in history to lose $200 billion off his net worth, according to the Bloomberg Billionaires index. After Tuesday’s selloff, Musk’s personal fortune plunged to $136.9 billion. His net worth peaked at an estimated $340 billion in November 2021.

In an email last week, Musk told Tesla employees not to be “bothered by stock market craziness” during a last-minute pursuit of production targets.

Investors who bet against Tesla’s stock earned $17 billion in mark-to-market profits last year, according to data from S3 Partners Research released last week. Tesla ranked as the most lucrative bet for short sellers over the last 12 months.

In a release alongside its delivery report, Tesla said it would host its annual investor day on May 1.

With Post wires