Tesla's value evaporates 80 billion USD because of Elon Musk's warning

Elon Musk's concerns about Tesla's slowing growth caused the company's stock to record its sharpest daily drop in more than a year on January 25.

Tesla Inc. shares fell 12% on Jan. 25 after CEO Elon Musk warned that revenue growth would slow this year despite steep discounts that have eroded profit margins, raising concerns among investors about weak demand for electric vehicles and rising competition from China.

Musk said Tesla’s growth would “slow down significantly” as the company focuses on a new, lower-cost electric car that will go into production in the middle of next year. They hope the car will be a new hit for Tesla. However, he said ramping up production of the car would be challenging because of the breakthrough technology involved.

Tesla shares suffered their biggest one-day drop in more than a year yesterday, wiping out $80 billion in market capitalization. The company has lost $210 billion in market capitalization since the beginning of the month. Tesla’s decline has helped short sellers make a profit of $3.45 billion this year, according to research firm Ortex.

“The news for Tesla is pretty negative right now,” analysts at TD Cowen said, noting that the automaker’s fourth-quarter 2023 revenue and earnings both fell short of forecasts.

Shares of other US electric car companies also fell. Rivian Automotive, Lucid Group and Fisker fell 4.7-8.8%.

The electric vehicle sector has been struggling with falling demand for more than a year, and Tesla’s price cuts could put even more pressure on startups and traditional automakers.

"Tesla's problem now is that if it wants to increase revenue, it has to sacrifice profit margins, due to competition from BYD (China) and other rivals," said Michael Hewson, a market analyst at CMC Markets.

However, Tesla is still the most valuable car company in the world. Its price-to-earnings (P/E) ratio is also much higher than that of tech giants like Apple or Microsoft.

Some analysts believe that number will decline if Tesla’s revenue growth and profit margins slow. “Tesla is becoming more and more like a traditional automaker,” said Toni Sacconaghi, an analyst at Bernstein.

Ha Thu (according to Reuters)

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