Tesla’s Market Valuation Plummets by $80 Billion Following Musk’s Sales Forecast

Tesla’s market standing took a severe hit, nosediving over 12 percent and erasing $80 billion in valuation, following CEO Elon Musk’s cautionary remarks about slower sales growth. Despite aggressive price cuts intended to bolster sales, the world’s leading electric vehicle (EV) manufacturer faces dwindling margins and mounting concerns over subdued demand and escalating competition from China.

Musk’s announcement pointed to a period of tempered growth as Tesla shifts its focus to developing a more affordable, next-generation electric vehicle at its Texas facility, slated for production in the latter half of 2025. This upcoming model is anticipated to rekindle Tesla’s delivery boom. However, Musk underscored the formidable challenges of ramping up production for this technologically advanced vehicle.

The repercussions of Musk’s announcement were felt immediately, marking Tesla’s most significant intraday percentage loss in over a year. This downturn slashed Tesla’s market capitalization by approximately $210 billion for the month, leaving investors and industry analysts concerned. TD Cowen analysts characterized the situation as a transition from bad to worse, exacerbated by Tesla’s fourth-quarter revenue and profit falling short of expectations.

The ripple effects of Tesla’s downturn extended to other EV manufacturers as well, with companies like Rivian Automotive Inc, Lucid Group, and Fisker experiencing declines ranging from 4.7 percent to 8.8 percent.

The EV industry, already contending with a demand slowdown for over a year, is bracing for intensified pressure, particularly due to Tesla’s price reductions. These cuts are expected to further challenge both emerging startups and established automakers such as Ford. Michael Hewson, the chief market analyst at CMC Markets, highlighted the dilemma Tesla faces. Any substantial effort to boost sales is likely to come at the expense of operating margins, as Tesla navigates stiff competition from BYD in China and other players globally.

In response to the unfolding scenario, nine brokerages downgraded Tesla’s stock, while seven opted for an upgrade. Despite these mixed signals, the median market sentiment leans towards a “hold” rating, with a median price target of $225, reflecting a 23 percent upside from Thursday’s closing price of $182.63.

Tesla’s valuation, trading at nearly 60 times its 12-month forward earnings estimates, places it at a premium compared to its peers, including tech giants Apple, Microsoft, and Nvidia. However, as Tesla grapples with potential declines in sales growth and margins, justifying its lofty valuation could become increasingly challenging, prompting close scrutiny from market watchers and investors.