Tesla (NASDAQ:TSLA) stock has continued to slide lower after mediocre news reports. Year-to-date, TSLA is down by over 30%. After this pullback, some may see an opportunity to buy this top electric vehicle brand. It’s too early to say if the risks and uncertainties are already factored into share prices.
Rather, the stock has arguably been resilient, given the extent of current and potential headwinds. With this, Tesla may be in for yet another terrible tumble in the months ahead. It all has to do with the company’s existing challenges, cloudy prospects, as well as the stock’s rich valuation.
Tesla Stock: The Latest on Demand Challenges
Forget about “what’s wrong with Tesla right now.” A better question may just well be “what isn’t going wrong with Tesla right now.” Take a look at the latest headlines about the company, and it’s clear that it is experiencing issues on all fronts.
For starters, demand growth trends for the EV industry remain unfavorable. Tesla is not immune to this challenge. On April 2, the company reported its production and delivery numbers for the quarter ending March 31.
Production and deliveries of 433,000 and 387,000 vehicles, respectively, may sound like an impressive figure on the surface.
However, the delivery figure represented an 8.5% decline compared to the prior year’s quarter. Sequentially, deliveries were down by more than 20%.
If that’s not disheartening enough, demand challenges could be intensifying. At least, that may be the case with Tesla’s Chinese sales, as Barron’s pointed out in a recent article on Tesla stock.
To bolster sales, the EV maker is taking some drastic measures. These include slashing the price of its full self-driving package by 50%. Yet while this could help shore up the top line, it may come at the expense of margins.
Holding Fairly Steady, but for How Much Longer?
Recent developments with Tesla stock also indicate the company is dealing with other headwinds, not just demand-related headwinds. For instance, news of the company halting deliveries of its much-hyped Cybertruck hasn’t helped matters. Rumors are that this moratorium is because of safety concerns with the electric truck’s accelerator pedal.
Also, while Tesla CEO Elon Musk has denied that the EV maker has scrapped prior plans to bring the lower-priced Model 2 vehicle to market, these rumors have heightened uncertainty about this particular growth catalyst for the stock.
Again, in light of all of these issues, one can argue that TSLA is holding up relatively well. However, this could change sooner than you think.
For one, Tesla’s next quarterly earnings release is just a week away. Given that we already know last quarter’s delivery numbers, don’t expect too many surprises with the result themselves. Still, with sentiment leaning bearish, any sort of negative surprise, even if modest, could drive a sharp post-earnings plunge.
If quarterly guidance focuses more on the company’s renewed efforts to bring the Robotaxi to market, doing little to assuage concerns about the Model 2 rollout, this too could elicit a negative response from the market.
Stay Away, as Shares Still at Risk of Another Big Correction
Sure, while Tesla could decline following the upcoming earnings release, it’s not like shares are going to fall by 20%, 30%, even 50% after earnings. However, such sharp price declines may lie ahead.
If demand issues persist, and Tesla keeps focusing more on “fun” projects like Robotaxis and the Cybertruck, rather than on potential growth re-accelerators like the Model 2, it’ll become even more difficult for TSLA to sustain its high forward earnings multiple of 61.6.
As falling faith in Tesla may lead to severe derating, err on the side of caution, and sell/avoid Tesla stock.
Tesla stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.