Tesla stock price has imploded this year as concerns about the company remains. TSLA has plunged from the year-to-date high of $488.50 to the current $290, its lowest level since November 7. Its market cap has moved from $1.53 trillion to $928 billion, leading to a $602 billion wipeout. Here are the three main reasons why the TSLA share price has collapsed.
Elon Musk and DOGE
The main reason why the Tesla stock price has crashed is because of Elon Musk’s engagement with the Department of Government Efficiency (DOGE). This role has seen him cut costs in the American government.
The challenge is that investors believe that Musk is spending too much time handling government issues that he has neglected Tesla. Keep in mind that Musk is also the head of SpaceX and Neuralink. He also leads The Boring Company and X, formerly known as Twitter.
His involvement in the government could also tarnish his reputation and lead to slower growth in the US and other countries. For one, Tesla could be used as a burgaining chip in terms of US and Chinese relations.
Read more: Tesla is no longer a trillion-dollar company: what investors need to know
Tesla Europe sales are falling
Meanwhile, there are signs that Tesla’s growth momentum in Europe, a key market has started to wane. Data shows that Tesla’s deliveries dropped by 45% YoY in January across the continent. It sold less than 10,000 vehicles in January in Europe, a big drop from the 18,100 it sold in the same period last year.
Tesla’s growth, especially in China, may start to fade now that many local brands are of a better quality than Tesla. This includes some well-known brands by companies like Nio, XPeng, Li Auto, BYD, and Xiaomi. In other words, Tesla has now lost the competitive advantage it had in the past.
TSLA stock as earnings growth and valuation
The Tesla stock price has crashed after the company published weak financial results. These numbers revealed that its automotive revenue dropped by 8% in the fourth-quarter to $19.8 billion. Its total revenue rose by just 2% during the quarter to $25.7 billion.
In contrast, other popular EV companies, especially the Chinese ones, have reported strong revenue and delivery growth. For example, Xpeng’s revenue jumped by 18.4% in the third quarter and analysts expect another quarter of double-digit growth.
Therefore, analysts doubt whether Tesla deserves a premium valuation considering that its growth has stalled. Tesla has a forward P/E ratio of 115.93, higher than the sector median of 17.
Tesla has always had a premium valuation because of its large market share and innovation. This edge has now ended as the industry gets more competitive.
There are other reasons why the Tesla share price has crashed. For one, there are concerns about its robotaxi business and when it will be launched. It will also suffer from Donald Trump’s tariffs, which will hurt its raw materials. Tesla has also crashed as Bitcoin price fall since it is one of the top BTC holders
Tesla stock price technicals
TSLA stock chart by TradingView
The other key reason why the TSLA share price has crashed is that it has some weak technicals. It has dropped from last year’s high of $488 to $290 today, falling below the 200-day and 50-day Weighted Moving Averages (WMA). That is a sign that bears are taking over the stock.
It has also crashed below the key support level at $297.77, its lowest swing in July 2023. Therefore, the stock may continue falling as sellers target the key support at $270, its highest point in July 2024.
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