Tesla shares faced downward pressure following reports of Germany’s SAP discontinuing plans to procure electric cars from the U.S. company and Piper Sandler reducing its price target on the stock due to revised delivery expectations for the year.
SAP’s decision impact
Tesla, led by Elon Musk, experienced a 4% decline in shares to USD 180.46, reaching its lowest point since May 2023. This decline potentially translates to a market capitalization loss of nearly USD 24 billion. SAP’s decision reportedly stems from delivery delays and price fluctuations, as reported by German publication Handelsblatt.
Piper Sandler’s forecast adjustment
Piper Sandler’s adjustment of Tesla’s price target follows revised delivery projections, with expectations set at 1.93 million vehicles for the year, indicating a growth rate of about 7%. This figure falls significantly short of the 50% annual growth target set by Musk three years ago.
Musk’s statement and regulatory scrutiny
Elon Musk cited increased interest rates in January, leading to higher monthly payments for Tesla cars, consequently impacting consumer affordability. In addition, U.S. safety regulators elevated their investigation into Tesla vehicles’ power steering loss to an engineering analysis, a prelude to potential recall demands.
Allegations against Musk
Over the weekend, the Wall Street Journal reported that Elon Musk’s use of illegal drugs was known to several current and former board members of both Tesla and SpaceX. These allegations add to the recent challenges facing the tech entrepreneur.
Valuation comparison
Despite the recent setbacks, Tesla’s stock maintains a high valuation, trading at 57.75 times its 12-month forward earnings estimates. This valuation comparison positions Tesla significantly higher than its peers such as Meta Platforms and Amazon.com among the Magnificent Seven stocks.
Tesla faces multiple challenges, including supply chain disruptions, regulatory scrutiny, and questions regarding corporate governance. These factors contribute to the ongoing volatility and downward pressure on its stock value, prompting investors to closely monitor the company’s performance and future strategic decisions.