TSLA Stock: Don’t Expect a Fast Charge With Tesla Anytime Soon

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Tesla (NASDAQ:TSLA) stock has demonstrated far greater resilience that I suggested in my last article. Earlier this month, I argued Tesla was set to stay on a downward trajectory following the company’s post-earnings plunge. Rather than sinking even lower, shares have found support and experienced a modest bounce-back in price. That said, I wouldn’t necessarily view this as a sign that a climb to higher prices will continue.

Yes, compared to the spate of bad news regarding the company’s U.S.-based competitors, it makes sense why shares in the EV market leader have performed far better in recent weeks. But while the company could hold onto a high share of the U.S. electric vehicle market for the foreseeable future, other headwinds persist. As before, middling or even negative performance likely lies ahead.

TSLA Stock: These Two Issues Still Are Troubling

Based on recent news with the would-be “Tesla killers,” Lucid Group (NASDAQ:LCID) and Rivian Automotive (NASDAQ:RIVN), it’s clear that these onetime challengers represent zero threat whatsoever, in Tesla’s dominance of the U.S. electric vehicle market.

The situation continues to go from bad to worse with Lucid. During the December quarter, Lucid’s sales fell by 39% compared to the prior year’s quarter. Net losses increased by a similarly sized figure. Production guidance for 2024 came in barely above 2023 levels.

At Rivian, as I pointed out last week, the company admittedly just moderately short of expectations last quarter, but based upon its latest guidance, the truck and van-focused EV manufacturer appears poised to experience a “transition year” (i.e. a year of limited growth) during 2024.

That’s not all. As InvestorPlace’s Rich Duprey recently pointed out, incumbent automakers like Ford (NYSE:F) and General Motors (NYSE:GM) are also scaling back their respective EV production expansion plans. Still, even as Tesla appears secure in its U.S. EV market leader status, a pair of issues will continue to be major headwinds for TSLA stock: slowing growth and falling margins.

Why the Risk of Another Pullback Still Looms

Tesla may need not worry too much about domestic competition, but the company is facing headwinds of its own. Globally, EV demand growth has slowed down. Stateside and in Europe, issues like range anxiety and affordability are the culprit.

In China, not only does Tesla face far more formidable competition. The Chinese EV market (the world’s largest) is still contending with the impact of China’s sluggish post-Covid economic rebound on electric vehicle demand. With this, it’s hard to see the company quickly resolve the aforementioned growth and profitability headwinds.

Previously, I have discussed how TSLA stock won’t bounce back until these problems enter the rearview mirror. Or, if progress with a game-changing catalyst emerges. Examples of game-changing catalysts include the roll-out of a fully autonomous self-driving feature, or the launch of lower-priced vehicle models.

Sure, it’s possible that investors continue to cut Tesla some slack, keeping shares steady ahead of better times returning. However, I also wouldn’t rule out the possibility of another pullback in the interim. The continued reporting of slowing sales/falling margins, or other factors like further delays by the Federal Reserve in lowering interest rates, could drive this.

Bottom Line: Continue to ‘Watch and Wait’

Currently trading at 61.9 times forward earnings, TSLA is priced as if the aforementioned issues are temporary, one-time hiccups, but much uncertainty remains whether Tesla can re-enter high growth mode.

If the company fails to do so, it’ll keep on being increasingly difficult for the stock to sustain its massive valuation premium over other automotive stocks.

The above catalysts could help achieve this. However, investors need more than just hypothetical catalysts in order to get charged up again about this stock.

After all, why pay nearly 62 times earnings for decelerating TSLA, when you can buy shares in fast growing EV companies like BYD (OTCMKTS:BYDDF) and Li Auto (NASDAQ:LI) for between 15-25 times earnings?

As TSLA stock could get knocked down due to fear, uncertainty, and doubt about its comeback chances, continuing to “watch and wait” remains your best move.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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