(Bloomberg) – Tesla Inc. shares kicked off the new year on an ominous note, faltering this week on renewed worries about weakening demand for its electric cars, and sending its market value briefly below that of the Facebook’s parent company, Meta Platforms Inc., for the first time in over a year.
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Shares of the Elon Musk-led electric vehicle maker fell 7.7% to $101.81 on Friday, but then erased losses to rise 1% as the broader market rallied. rallied after economic data showed wage gains slowed, a development that may help the Federal Reserve fight inflation. At the start of the session, Tesla’s market capitalization fell to around $321 billion, falling below Meta’s roughly $334 billion.
Tesla’s stock has plummeted over the past three months as growing concern over tech sales and Musk’s concern over his acquisition of Twitter Inc. gave way to growing doubts over demand for Tesla. electric vehicles facing a recession. Two big events in the first week of the new year — weaker-than-expected fourth-quarter deliveries and another round of price cuts on its vehicles in China — heightened those fears.
It is these risks that make investors wary of the stock’s future, at least in the short term.
“With all the moving parts of Tesla – price cuts in China and increased competition, there are currently too many unknowns to fully understand what a proper valuation is,” said Mark Stoeckle, chief executive of Adams. Funds, which owns Tesla shares. . . “When you see a train wreck like this, it’s best to step back and watch, not jump into it.”
Although mega-cap tech companies, the main drivers of Wall Street’s previous bull market, struggled last year as they bore the brunt of rising interest rates and falling investors’ appetite for risky investments, Tesla’s decline still stands out. The company ended 2022 at the very bottom of the NYSE FANG+ Index, a gauge of 10 tech giants including names like Meta, Apple Inc., Microsoft Corp. and Amazon.com Inc.
Tesla’s valuation falling below that of Meta also highlights the many commonalities between the two stocks. Although they have very different businesses, the two companies face widespread skepticism among investors about their future, while their high-profile CEOs have recently made missteps.
Musk’s grip on retail investors, among whom Tesla enjoys almost cult status and who have been net buyers of the stock even during its worst performance, has also begun to waver. The first signs of Tesla retail exhaustion are emerging, Vanda Research analysts wrote in a note Thursday.
“Retail investors have bought more Tesla stock in the past six months than they have overall in the previous 60 months, which means this group is definitely feeling the pinch of the last few months’ slide” , said Marco Iachini and Giacomo Pierantoni of Vanda.
Sharp declines in value over the past year have ejected companies Meta and Tesla from the elite club of the $1 trillion US stock market – an exclusive group in which only six companies have ever participated. Only three Wall Street companies are now worth more than $1 trillion: Apple, Microsoft and Alphabet Inc.
Tesla stock closed 2022 with a record 65% drop, eclipsing the 33% drop in the Nasdaq 100 index. In the first trading session of 2023, shares of the Austin, Texas-based automaker fell more than 12% after delivering fewer vehicles than expected last quarter, despite strong incentives in its largest markets.
Meta, on the other hand, has held up better in recent months. Its shares soared more than 40% from the November low as the social media company embarked on drastic cost-cutting measures, including cutting more than 11,000 jobs. Since the beginning of this year, it has gained more than 5%.
(Updates to stock movement in second paragraph, added detail on retail trade in eighth and ninth.)
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