Embattled automaker Tesla (TSLA) has slid 12% over the past two days as shock European sales figures jolted investors into admitting the company may be doomed.
Tesla opened at $330.53 on Tuesday and closed at $290.8 at the close of trading on Wednesday, before falling further in the after-hours. The stock is down 26.78% in the last month and 23.33% YTD, although it is still up 46% YoY due to a furious rally after the U.S. Presidential Election.
The fall in price has taken Tesla’s market capitalization below the $1 trillion level, to somewhere just north of $900 billion.
This week’s tumble was triggered by a report detailing Tesla’s 45% sales collapse across all European markets in January. The report provided definitive proof that Tesla CEO’s involvement in radical far-right politics has severely impacted sales - at least in Europe, the world’s third-largest auto market.
But all signs point to this week’s slide as only just the beginning.
The Customer is King
Tesla remains probably the world’s most overvalued stock. The company trades at an eye-watering 143 times earnings. And nearly all of those earnings are tied to a revenue stream that is currently collapsing by 50% and likely to collapse even further in the months and years to come.
Over the next few months more sales reports will be released for Europe, the US and China. Some may be better than others. But no one is expecting any of them to be good, and some may show even worse declines than we saw last month.
The CEO is claiming a slew of magical new products will save the company from extinction and power new earnings growth to replace the lost automotive revenue. But these magical products are either entirely non-existent (humanoid robots that actually work) or are also vulnerable to the same decline in consumer sentiment that is crushing Tesla’s core business (the supposed ‘Robotaxi’).
Tesla investors are finally waking up to this ruse. And in so doing they are learning a hard truth about investing in consumer-oriented companies - they cannot survive if most consumers hate them.
So yes Tesla is down big over the last few days. And Tesla is officially no longer a $1 trillion company. But in truth Tesla with Elon Musk at the helm is not a $900 billion dollar company either. It’s hardly even a $9 billion company. Buckle up. More red ink is coming.