The first quarter of 2024 is in the books, and it's official: Tesla(NASDAQ: TSLA) was the worst-performing stock in the Nasdaq-100.
The electric vehicle (EV) maker's stock plunged 29.3% during the quarter. That narrowly edged out Sirius XM Holdings (down 29.1%) for the bottom spot, ahead of other Nasdaq-100 laggards, such as LululemonAthletica, CharterCommunications, and WarnerBros. Discovery.
Data by YCharts.
So, is this a buying opportunity for investors, or is it time to cut losses?
What's going on with Tesla?
Tesla has been making headlines for all the wrong reasons. Let's start with the company's biggest problem: Overall demand for EVs is falling short of expectations.
There are several reasons why this is happening:
- High interest rates and prices
- Lagging EV infrastructure (charging stations)
- Manufacturing delays
- Tax credit confusion and uncertainty
- An overall lack of consumer acceptance
In short, EV sales have leveled off at around 9% of overall new vehicle sales when many industry analysts expected them to climb much higher by now. And while it's still likely that EV sales will break through into the double-digit range as the auto industry continues to transition away from gas-powered vehicles, this slower growth is hurting every company that makes EVs -- Tesla in particular. That's because Tesla previously set aggressive sales and production goals: 50% annual production growth, culminating in 20 million vehicles annually by 2030.
Now, Tesla's pathway to that goal is in doubt. The company recently released disappointing delivery figures that declined 9% year over year. Moreover, Tesla chief executive officer (CEO) Elon Musk noted during the company's January earnings call that "our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas."
What's more, the company is facing a litany of other issues:
- Growing competition in the critical Chinese market
- Supply chain disruptions due to Red Sea turmoil
- Vandalism outside the company's German factory temporarily halted production
- Musk's purchase and management of Twitter, now X, has alienated some car buyers
To sum up, Tesla is facing both macro problems (a sluggish EV market) and micro problems (slowing production growth and escalating competition).
Low valuation makes Tesla attractive
Yet despite its problems, Tesla does have many positives. The company is undoubtedly adept at making EVs, indeed lots of them -- and selling them for a profit.
While other EV makers like Rivian have struggled to turn a profit, Tesla generated $15 billion in net income over the last 12 months with some of the strongest profit margins in the industry.
Accordingly, the stock's price-to-earnings (P/E) multiple continues to shrink. It now stands at 40. That's one of the lowest valuations for Tesla since its all-time low of 30 back in Jan. 2023.
Data by YCharts.
A reminder: Tesla stock more than doubled in calendar year 2023, skyrocketing from under $120 per share to more than $240.
Is Tesla a buy now?
In addition to its attractive valuation, Tesla has a few other tricks up its sleeve. For one, Elon Musk recently announced the company's long-awaited robotaxi will debut on Aug. 8. While the specifics of the robotaxi remain to be seen, it could serve as a much-needed catalyst for the stock, given the importance of self-driving technology to the company.
So for long-term investors who believe both in the EV transition and Tesla's ability to pull off full self-driving, this year's pullback could serve as an excellent buying opportunity.
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Jake Lerch has positions in Lululemon Athletica and Tesla. The Motley Fool has positions in and recommends Lululemon Athletica, Tesla, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
