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Tesla shares have lost more than 56% so far this year
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Retail investors’ portfolios fall more than the market because of the brand
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The electric car market will change in the coming years, which could impact the company
Forbes magazine makes accounts in real time and after the first week of December Elon Musk is no longer the richest man in the world. In his place is Bernard Arnault, the CEO of the luxury brand LVMH. The reason for this change in the podium are the Tesla stockmain source of the fortune of this businessman, who they have fallen more than 56% so far this year (at the time of publication of this article.
Investors are not impressed by news like that the Giga plant in Shanghai has achieved a final assembly record, for instance. They are most concerned about price cuts for the cars it has in its inventory in this country, something that comes on top of other buying incentives and a previous price cut in October.
Additionally, to what is perceived as weak demand in China is added the fact that Musk has turned to Twitter —and sold for the purchase of this traditionally loss-making social network shares of the car company worth about $20,000 million—.
These are some of the downward pressures weighing on the company’s performance on the stock market, which has also been penalized by the wide fall in the technology sector, has suffered from the problems of supply chains, the closures in China and the significant increase in the prices of raw materials.
Musk is still filthy rich, trailing only Arnault on the billionaires list, but the fall has been especially hard for him. other shareholdersthose who are retail or retail investors since this Musk company is one of the favorites of their portfolios.
According to VandaTrack data, the disproportionate bet on Tesla, which currently accounts for about 10% of the retailer’s portfolio, has been the main driver of the recent underperformance for these investors.
Retail Investor Loyalty
According to these analysts the portfolio of the average retail investor has fallen by 32% in what is the worst result in a long time and certainly for the younger generation of investors. The S&P500in this bearish year, has lost around 17% for the moment with just a few weeks left before the end of the year.
In particular, VandaTrack estimates that aggregate retailer losses from the automaker’s shares have reached $78 billion this year, double that of second-worst favorite stock AMD.
Interestingly it is not a deterrent. What seems to be a certain loyalty to Musk was reflected in the fact that when This businessman launched an attack on Apple Because of its relationship with Twitter, Tesla was once again the most purchased stock of those normally favored by retailers, even as Apple is also a favorite among retailers.
Analysts are divided on Tesla’s potential, although there is a majority that bets on its overweight or buy recommendation, largely due to the sharp fall in the shares, which is expected to be close to its bottom, and the expectations that In the long term, the company will recover positions in a market that is growing because it is the future that is taking shape in the automotive industry, that of electric cars (EV).
However, in the short and medium term there are some important considerations. For starters, despite the drop, Tesla’s price is still high compared to the rest of the automakers and 2023 is going to be a year of high interest rates, concerns about a global economic slowdown or recession, and lower spending by consumers. consumers, which usually takes its toll on titles that show a certain overvaluation.
Lower market share
Additionally, S&P Global Mobility recently stated that although Tesla is still the leader in electric cars in the US, this position is no longer an ivory tower as there are more and more affordable electric cars on the market.
In the third quarter of the year Tesla had a 65% share of the US electric vehicle market, up from 71% last yearaccording to S&P Global Mobility.
By 2025 it is expected to be 20%, yes, in a larger market. “Before anyone feels too bad about Tesla, however, it must be remembered that the brand will continue to grow in unit sales, even even if their market share declines,” explained Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility.
However, Morgan Stanley analysts, whose criteria is overweight, explain that in the future they see that there must be price reductions in electric cars. “A price cut is absolutely necessary for EV market penetration forecasts to be met in a saturated market like China, structurally complicated like Europe and at a time of slowdown in the US.”
At the moment, the promise that electric vehicles have a price similar to those of internal combustion has not been fulfilled and this investment bank believes that this will be one of the issues that define 2023, the slowdown in demand relative to the acceleration of the offer. The message to investors is that we see risks of demand or price destruction (as is the case in China), or a combination of the two.
Vanda analysts believe that despite the appetite of retailers for this company, declines in value carry the risk of starting a chain of margin calls or request for new guarantees.