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Tesla stock suffers New Year’s Eve hangover on demand worries, delivery issues

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By Aditya Soni and Eva Mathews

(RockedBuzz via Reuters) – Shares of Tesla Inc started 2023 with a thud, shedding more than 12% on Tuesday on growing concerns over weakening demand and logistics issues that have hampered deliveries for the world’s most valuable automaker.

Once worth more than $1 trillion, Tesla has lost more than 65% in market value in a tumultuous 2022 that has seen it increasingly challenged by other automakers and faced production woes stemming from COVID lockdowns in China .

Tuesday’s slide lost nearly $50 billion in market value, roughly equal to the valuation of rival Ford Motor Co, which sold three times as many cars as Tesla last year.

The sell-off came after Tesla missed market expectations for fourth-quarter deliveries despite shipping a record number of vehicles.

“Tesla, while it has grown, is now entering a phase of still solid but slower growth,” said Morningstar analyst Seth Goldstein. As a major automaker, “it’s likely to be more affected by an economic slowdown,” he added.

Several Wall Street analysts said they expect more pressure on the stock in the coming months due to increased competition and weaker global demand.

In recent months, global automakers have battled a decline in demand in China, the world’s largest auto market where the spread of COVID-19 has hit economic growth and consumer spending. Tesla offers deep discounts there and a subsidy for insurance costs.

At least four brokerages cut their price targets and earnings estimates on Tuesday, pointing to delivery shortfalls and Tesla’s decision to offer more incentives to boost demand in China and the United States, the world’s two largest auto markets.

The company’s stock was the worst performer on the benchmark S&P 500 index on Tuesday, dropping as low as $104.64 a share, the lowest since August 2020. More than 220 million shares traded hands during normal hours of negotiation.

The electric vehicle maker’s performance in 2022 was among the worst in the S&P 500 index.

“There are so many things that work against the stock. One of course is Musk’s involvement in Twitter,” said Dennis Dick, market structure analyst and trader at Triple D Trading.

Tesla’s market value has fallen by about $370 billion since CEO Elon Musk closed the deal to buy social media firm Twitter.

Part of that drop came from his stock sale to fund the $44 billion deal, while shares also fell on concerns among investors that Musk has been sidetracked by the social media company.

Valued at about $341 billion, Tesla is still the world’s most valuable automaker, even though its output is a fraction of rivals like Toyota Motor Corp.

Tesla delivered 405,278 vehicles in the fourth quarter, below analyst estimates of 431,117. For all of 2022, its deliveries are up 40%, missing Musk’s 50% annual target.

The result “came at the cost of increased incentives, prompting lower pricing and margins,” brokerage JPMorgan said in a statement, lowering its price target from $25 to $125.

41 analysts’ average price target on the stock was $250, more than double its current price, according to data from Refinitiv. The lowest price is $85, from Roth Capital Partners.

The shortage highlighted the logistical hurdles facing the company, known for its rush on quarter-end deliveries. The gap between production and deliveries widened to 34,000 vehicles as more cars became stranded in transit.

The automaker plans to execute a reduced production schedule in January at its Shanghai plant, extending the reduced production that began in December through 2023, RockedBuzz via Reuters reported.

(Reporting by Aditya Soni, Eva Mathews and Akash Sriram in Bangalore; Additional reporting by Amruta Khandekar; Editing by Tomasz Janowski, Shounak Dasgupta and Arun Koyyur)