Tesla Stock Analysis: Can TSLA Rebound Against All Odds?

Stocks to sell

Tesla (NASDAQ:TSLA) has many powerful, negative catalysts at this point. Among the most important items are the automaker’s continued market share losses amid tough competition in the U.S. and China and the obvious hostility of the Biden administration towards the automaker. Also importantly, a large part of the American media appears to have significant animus towards Tesla. The company also has some significant technical problems.

On the other hand, the electric vehicle (EV) leader has made significant strides in the advanced driver assistance systems/self-driving area. Also, the hostility of Washington and the media towards Tesla and CEO Elon Musk could ease after the U.S. elections. The company’s new, low-cost EV could easily become a big hit, while its energy storage business may also take off.

Given these points, along with the automaker’s very high valuation, I recommend that investors sell Tesla stock. Still, because the EV maker has numerous positive catalysts, keep an eye on TSLA stock going forward.

Market Share Losses And Media Hostility

Tesla’s share of the U.S. EV market sank to 51.3% last quarter from 61.7% in Q1 of 2023. The automaker lost share to multiple, veteran automakers, including General Motors (NASDAQ:GM) Cadillac, Hyundai (OTC:HYMTF), BMW (OTC:BMWYY) and Ford (NYSE:F). Moreover, the number of EVs that Tesla actually sold in the U.S fell about 13% in Q1 compared with the same period a year earlier,

Also noteworthy is that two newer EVs the automaker launched in the U.S. — the Cybertruck and the Tesla Semi — have not generated significant demand yet in America.

Hostility towards the automaker by media outlets, in my view, contributed tremendously towards its weak performance in America. Likely angered by Musk’s free-speech policies on X and his harsh, frequent criticism of the Biden administration, the media frequently highlights Tesla’s technical issues and layoffs. Meanwhile, former President Donald Trump remains hostile toward EVs. That has spurred some supportive outlets to also be critical of EVs in general and Tesla’s automobiles in particular.

And in China, Bloomberg estimated last month the automaker’s market share had dropped to 6.7% in Q4 of 2023 from 10.5% in Q1 of last year. According to the news service, Tesla is having trouble because it only sells two types of EVs. Its rivals offer Chinese consumers a large number of choices.

Troublesome Investigations and an Elevated Valuation

The Biden administration is investigating the EV maker for a myriad of issues. They range from the recall of its EVs over a defect in its autopilot system to “personal benefits, related parties, vehicle range and personnel decisions.” The administration is also considering leveling securities and wire fraud charges against the automaker for its comments about its self-driving capabilities.

It is worth remembering that former Nikola (NASDAQ:NKLA) CEO Trevor Milton was sentenced to four years in prison over securities and wire fraud. So Musk himself could be in very hot water if similar charges are leveled against him by the Justice Dept. And of course, Tesla could very well be a different company without Musk at the helm.

Meanwhile, on the valuation front, Tesla stock is changing hands at a price-earnings ratio of 69. That’s very rich for an automaker.

Tesla Could Make a Huge Comeback

The newest version of Tesla’s full-self-driving (FSD) offering appears to be dramatically improved over previous iterations. For example, the amount of “unnecessary braking” is “significantly reduced.” The system’s control over speed is also “dramatically improved,” InsideEVs reported. Moreover, Musk has reportedly ordered the firm to concentrate on improving its advanced driver assistance systems/self-driving capabilities. Over the longer term, Tesla could become the recognized, worldwide leader in this area. It could boost its market share and enable it to charge high subscription fees for FSD.

As I pointed out in the introduction, Tesla’s low-cost EV, which could be out as soon as 2025, could be a positive game-changer for the automaker. Indeed, given the relatively small number of affordable EVs available to American consumers, such an automobile could tremendously boost the firm’s top and bottom lines.

Further, Trump could retake the White House, likely easing the automaker’s regulatory headaches. And the media is likely to become less hostile to Tesla as the country’s focus on politics eases following the election. Finally the company’s energy-storage products may generate much more revenue as the demand for electricity surges.

Still, given the company’s many negative catalysts, Tesla stock is the quintessential “show-me story” at this point.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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