Tesla’s share price fell 6.1% on Thursday 2 January, the second trading day of the year, as a delivery miss prompted investors to flee the stock.
Tesla (NASDAQ:TSLA) posted a quarterly trading update that showed it had produced approximately 459,000 vehicles and delivered 495,570 during the fourth quarter (Q4) 2024.
The figure fell short of the 498,000 consensus expectation among analysts polled by FactSet. It is the first time Tesla has missed analysts’ quarterly delivery expectations in over a decade.
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“The shine has come off Tesla, after its delivery numbers for the final quarter of 2024 fell well short of expectations,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
The 6.1% decrease in Tesla’s share price wiped approximately $175 billion off its market cap, according to Forbes – around the total value of HSBC.
While implying a 2.3% increase in quarterly deliveries year-over-year, the Q4 numbers meant that Tesla’s total deliveries in 2024, 1,789,226, fell below 2023’s total of 1,808,581. This is the first time that Tesla’s annual deliveries have fallen year-over-year since 2011.
Tesla’s share price plummeted, as investors ditched the stock on fears that its core car-making business is struggling to withstand increasing competition, and that its product lines are overpriced. The question of whether to buy Tesla shares hinges on how damaging this dip in electric vehicle deliveries is compared to its long term goals.
“Although Tesla wants to be seen as a robotics company at its core, its underlying performance as a carmaker is closely watched, and these numbers demonstrate how tough the industry is right now,” says Streeter. “Chinese rival BYD is nipping at its heels, with a jump in sales for December.
Tesla’s share price has nonetheless gained 53% over the past year, and it was the second-most-bought stock of December on interactive investor’s investing platform.
Tesla CEO Elon Musk and Donald Trump have been closely linked since the US election campaign, which saw Musk campaign enthusiastically for Trump. Musk is also in line to co-head a new Department of Government Engineering during Trump’s second term in the White House.
“Trump’s victory in the US elections sent Tesla stock soaring,” says Streeter. “There are hopes policies would be pro-Tesla in the coming years, with a potential acceleration of regulatory approval for Tesla’s self-drive technology being eyed.”
Tesla's tight squeeze
There are worries that these political machinations are leaving Musk asleep at the wheel while his core company – in the absence of full self-driving technology – veers into trouble.
The danger for Tesla is that its auto business appears to be under pressure from two sides.
On the one hand, traditional automakers are catching up on the electric vehicle game. Stellantis (NYSE:STLA) is steadily increasing its EV sales, and has a number of cars available in the sub-$30,000 price range that Tesla has long promised a model for.
At the same time, new EV specialists are emerging, in particular China’s BYD. Fuelled by government subsidies, BYD is driving down the costs of EVs to the point at which Tesla has had to offer steep discounts in order to retain market share. Even so, BYD delivered approximately 595,000 EVs during the quarter, taking top spot away from Tesla.
How expensive are Tesla shares?
Despite losing $175 billion in value in a single day, Tesla is still one of the world’s most valuable companies. Tesla shares closed 2 January at $379.28, down from $423.79 on the final trading day of 2024.
This makes Tesla’s share price very expensive compared to its fundamental performance. It has a trailing P/E ratio of 103.98, and a forward P/E ratio of 121.81; on both metrics, it is the most expensive stock in the Magnificent Seven. For comparison, the Nasdaq 100 – not known for its modest valuations – has a trailing P/E ratio of 33.07 and a forward P/E ratio of 27.12 (according to analysis from Birinyi Associates, via the Wall Street Journal).
This extreme valuation is anchored in an assumption that Tesla will, in time, solve the question of autonomy, and that its value will then go through the roof. Disruptive innovation-focused fund manager ARK Invest, and its CIO Cathie Wood, have set their 2029 price target for Tesla shares at $2,600. Their reasoning assumes that 90% of Tesla’s revenue by then will be derived from self-driving ‘robotaxis’.
This is why having the ear of the US President-elect is such a key advantage for Musk. While ARK’s valuation sounds outlandish, fast-tracked approval of Tesla’s autonomous driving technology could give it a head start in the robotaxi race that would make a quarterly vehicle deliveries miss seem like small potatoes.
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