Tesla’s Stock Faces Turbulence Amidst Market Flux and Internal Dynamics
In recent weeks, the stock price of pioneering electric vehicle manufacturer Tesla (TSLA) has encountered a series of setbacks, attributed to a confluence of internal company dynamics and external market forces. However, an additional element has emerged as a catalyst for the recent downturn, driving Tesla shares down on Friday.
On Friday’s trading session, Tesla stock experienced a 1.7% decline, reaching a value of $215.49. In contrast, the broader market remained relatively unchanged, with the S&P 500 maintaining its equilibrium and the Nasdaq Composite encountering a minor decrease of 0.2%. This dip marked the sixth successive drop for Tesla’s stock and the thirteenth within the last 14 trading sessions.
The performance of the market is partially accountable for this decline. At the commencement of Friday’s trading, the Nasdaq had already witnessed a 7% drop during the month. Given Tesla’s inherent volatility, the company’s stock tends to exhibit more pronounced fluctuations compared to the broader index, rising aggressively in favorable conditions and declining significantly during downturns.
Two of the best performing stocks of the past decade, animated since Tesla's IPO in June 2010. pic.twitter.com/j9TlJSSUqd
— Tesla Stock Bot (@dailyTeslaChart) August 20, 2023
Tesla CEO Elon Musk also played a role in the downward trajectory. In the second-quarter earnings conference call in July, Musk reiterated his preference for prioritizing growth in sales volume over pricing strategies. This statement triggered concerns within the market about the possibility of further price reductions and subsequent erosion of profit margins. After implementing substantial price cuts earlier in the year, Tesla’s operating profit margins for the first half of 2023 dropped to just over 10%, a notable decrease from the approximately 17% recorded in the corresponding period of the previous year.
Renowned investor and Tesla shareholder Gary Black highlighted the disparity between Tesla’s valuation and its aggressive price-cutting approach. He noted in a tweet that Tesla stock had underperformed compared to peers since the July 19 conference call.
Notably, the decline in Tesla’s stock appears to be influenced by developments in China. The bankruptcy filing of the Chinese real estate firm China Evergrande in the U.S. triggered a ripple effect, causing a decline in Chinese stock indexes. Consequently, the Shanghai Composite index experienced a 1% drop, and Hong Kong’s Hang Seng index fell by 2.1%.