Tesla (TSLA +3.87%) has had a tough go of it lately. While other "Magnificent Seven" stocks have had a banner year thus far, its stock has been in steady decline, falling roughly 30%. Compare that to Microsoft's 13% gain or Nvidia's monster 80% rise so far in 2024, and it's clear something is off for the electric vehicle (EV) pioneer.
Rough waters
Why has Tesla been struggling? The automaker is facing a cooling domestic market and stiffening competition across the Pacific.
At home, although EV sales are up from last year, growth is slower than many had hoped. In an attempt to boost sales, auto manufacturers across the board have slashed prices, with the average EV sticker price down 10.8%.
Abroad, Tesla is in an even worse spot. The company has seen sales in China -- its second-biggest market behind the U.S. -- fall significantly. Multiple Chinese manufacturers, led by BYD, are crowding the company out, producing more EVs at prices Tesla can't compete with.
Big miss
If there were any doubt Tesla was floundering, its recent release of first-quarter vehicle production and deliveries data put that to rest. To say investors were disappointed would be an understatement. Dan Ives, an analyst at Wedbush, described it as "an unmitigated disaster." Ouch.
Investors were already expecting bad news, with Wall Street pros having lowered their consensus forecast for the company's Q1 vehicle deliveries by about 14%, from 494,000 to 425,000, but Tesla missed even those reduced expectations. The company delivered just 387,000 vehicles in the quarter.
This was less than the year-ago quarter, when it delivered 423,000 vehicles, and it's the first time since 2020 that Tesla posted a year-over-year decline.
The stock slumped almost 5% the day the news broke.
NASDAQ: TSLA
Key Data Points
Could Tesla shares hit $2,000?
With all the negativity surrounding Tesla, its stock is down nearly 60% from its high in 2021 and it's trading around $170. This could present a solid buying opportunity.
Cathie Wood, head of Ark Invest, certainly thinks so. In a recent interview with CNBC after the deliveries data was released, the widely followed investor said now "is not the time to run for the hills."
Wood believes that Tesla is much more than simply an EV maker. She sees it as a robotaxi company. Wood thinks the technology will "deliver $8 to $10 trillion in revenue by 2030 and is one of the most important investment opportunities of our lifetimes."
This massive potential revenue has led Wood to place a price target on Tesla, of $2,000 per share.
If Tesla can deliver on the promise of self-driving taxis, it would undoubtedly create an enormous amount of value for the company, but it is a big if. Aside from the degree of difficulty in developing the necessary technology, the company faces stiff competition.
Alphabet-backed Waymo seems to be further along in its quest for truly autonomous vehicles. The company already has completely driverless vehicles on the road and recently passed an important milestone: testing the cars on the highway. Tesla has a lot of catching up to do.
So is Tesla stock a buy?
I think investors have overreacted, and critically, the stock's price-to-earnings ratio is back within reasonable (for tech) bounds, currently sitting around 40. Although that's still on the high end, it's nowhere near Nvidia's sky-high 72 and closer to the rest of the Magnificent Seven.
There may still be some rough waters ahead, but with some of the best talent in the world, Tesla has a very good chance of reducing its manufacturing costs significantly, allowing it to better compete at home and in China. This, along with the value that would be created if it captures even a fraction of a future robotaxi market, makes it a buy.
