Tesla Stock Is Headed for Its Biggest-Ever Annual Decline

Photos: The EV Rivals Aiming for Tesla’s Crown in China

“There’s concern that demand will fall just as Tesla’s ramping up their factories, and they’re not going to see the volume growth that the market had been anticipating previously,” said Seth Goldstein, an equity strategist at

Morningstar

Research Services.

Wait times that at the start of the year were as high as 30 weeks for some Tesla models in the U.S. have fallen sharply, according to Bernstein Research data. 

The share drop marks a sharp reversal for a stock that was cruising at speed little more than a year ago. Tesla’s shares hit an all-time high in November 2021 as the company produced profit, scaled up production and benefited from EVs gaining traction more widely. The stock has plunged more than 70% since reaching that peak. 

“Don’t be too bothered by stock market craziness. As we demonstrate continued excellent performance, the market will recognize that,” Mr. Musk this week told employees in a message. Tesla didn’t respond to a request for comment. 

Much of the share reversal has come in the past few months as Mr. Musk took over Twitter and after Tesla, which remains the world’s largest car company by market value, missed Wall Street’s expectations for third-quarter deliveries.

“The damage has been done since Oct. 1 and of course that’s accelerated in December,” said Gary Black, managing partner of the Future Fund LLC, which holds Tesla stock.

The electric-car maker in October lowered its full-year growth expectations, shying away from its goal of increasing deliveries annually by 50%. It would need to deliver a record-setting 495,000 cars in the fourth quarter to achieve that growth rate for the year. Wall Street expects Tesla to hand over 429,000 vehicles.

At the same time, the company is seeing increased competition from startups and traditional car makers, which have introduced new EVs and ramped up production this year as they seek to take market share from Tesla. There are 53 EV models either on the market or soon to be rolled out, according to J.D. Power. Some have wait lists stretching more than a year. 

Tesla has also run into production challenges at its factories this year. Earlier this month, the company suspended car production at its China plant a day earlier than planned, extending its planned eight-day shutdown, as it faces a wave of Covid-19 cases among workers. The car maker historically hasn’t stopped production during this time of year. 

The company halted production at the Shanghai plant for weeks earlier in the year because of Covid-19 lockdowns. Tesla this year also had issues with its new factories in Germany and Texas, struggling to get them up to speed.

Mr. Black has been among a group of Tesla investors expressing concern Mr. Musk may have been distracted from the company by the billionaire’s pursuit and subsequent acquisition of Twitter, which closed in October in a deal valued at $44 billion. Mr. Musk has said he has been spending much of his time to turn around the unprofitable business, though said he would seek someone to run the company day-to-day. 

The car maker’s brand image has also taken a hit in recent months, partly because of Mr. Musk’s involvement with Twitter and because of some of the comments he has made on the platform, according to brand surveys.

“If Elon would just hire a new CEO and stop tweeting his very conservative, political views, I think the stock could bottom here,” Mr. Black said.

The rout in Tesla shares this year caused Mr. Musk to cede the unofficial title as world’s richest person earlier this month to French billionaire

Bernard Arnault.

Mr. Musk also has unloaded Tesla stock this year, with some sales linked to Twitter. Since the stock’s November 2021 peak, Mr. Musk has sold more than $39 billion in Tesla shares. He recently said he wouldn’t sell further stock at least through next year.  

Tesla investors are likely to get a battery of news from the company next month that could give a glimpse of the stock’s prospects for the coming year. Tesla is poised to report its 2022 full-year vehicle delivery figures in the coming days and is expected to post a record full-year profit later in January. Mr. Musk has also indicated Tesla is getting close to disclosing plans for a new factory.

“The delivery numbers can really show how even in a slowing economic condition, how demand is holding up,” Morningstar’s Mr. Goldstein said. 

Wall Street remains upbeat about Tesla’s financial prospects. The company is projected to post a roughly $13 billion profit for 2022, more than double the prior-year figure, according to

FactSet,

with net income to rise more than 40% over the coming year.  

Some investors have been clamoring for Tesla to use parts of its cash cushion to buy back stock. Mr. Musk has indicated his general willingness to pursue a repurchase program, though he warned earlier this month that the broader economic outlook and recession worries could influence any decision.

“It wouldn’t be smart to do a buyback and then discover the recession is worse than 2009,” he said.

Write to Meghan Bobrowsky at [email protected]