Tesla’s stock continued its weeks-long nosedive on Friday as Elon Musk’s electric vehicle maker erased $700 billion in gains that had accumulated since the US presidential election.
Tesla’s shares had dropped by as much as 4.6% on Friday morning before recovering somewhat in the afternoon session — positioning them to wipe out the $700 billion surge they had enjoyed post-election.
Tesla’s stock has fallen by more than 28% in the last month. Since Jan. 1, the stock is down nearly 32%.
Following Donald Trump’s resounding victory on Nov. 5, Tesla became one of the market’s top performers, fueled by expectations that CEO Musk’s close ties to the president would benefit the electric vehicle manufacturer.
However, those initial hopes have been overshadowed by mounting concerns over the company’s core business — selling cars.
This latest dip follows a series of setbacks that have rattled investor confidence.
A January report revealed that Tesla’s quarterly sales had fallen for the first time in a decade while recent data indicate that the automaker is losing its dominance in key markets like Europe and China.
Additionally, some investors fear that Musk’s increasing involvement in politics is diverting his focus from leading the company.
“The bet on Tesla’s shares soaring due to Musk’s political involvement has not worked out thus far,” Adam Sarhan, founder of 50 Park Investments, told Bloomberg News.
“Investors who initially anticipated massive benefits from Musk’s political involvement got too excited, and now cooler heads are prevailing.”
Tesla’s struggles are compounded by a challenging macroeconomic environment.
The speculative fervor that drove stocks to record highs after the election has waned amid concerns about US trade policy and economic growth.
The S&P 500 has fallen more than 7% from its peak, while the Nasdaq 100 has entered correction territory.
Adding to Tesla’s woes, Bank of America analyst John Murphy downgraded his price target for the stock on Tuesday, cutting it from $490 to $380.
Murphy cited concerns over sluggish new car sales, the absence of updates on an affordable vehicle, and uncertainty surrounding Tesla’s robotaxi initiative.
That said, Tesla’s recent downturn has brought its stock into what technical analysts refer to as an “oversold” zone, potentially setting the stage for a short-term rebound.
Possible catalysts for a recovery could include improving sales figures, a company update on its robotaxi efforts or a broader resurgence in investor appetite for riskier equities.
Still, any potential rally would have to contend with lingering concerns about Tesla’s valuation.
The company’s forward price-to-earnings ratio remains elevated at 88, significantly higher than the S&P 500’s multiple of 21.
“Tesla’s forward price-to-earnings ratio (a valuation metric that compares a company’s current stock price to its expected future earnings per share) is still very close to 90,” Matt Maley, chief market strategist at Miller Tabak + Co., told Bloomberg News.
“So, the shares are still very expensive.”
As Tesla navigates an increasingly uncertain landscape, investors are weighing whether the recent selloff represents a buying opportunity or a warning sign of deeper challenges ahead.
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