Technology

Tesla closes below $ 600 for the first time since December – here’s what weighs on the stock

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Elon Musk, CEO of Tesla Motors, unveils a new all-wheel drive version of the Model S on October 9, 2014 in Hawthorne, California.

Lucy Nicholson | Reuters

Tesla shares fell as much as 8% on Friday morning. They have since rebounded and are down less than 4% as the markets rebounded dramatically late Friday, but the stock is still down more than 15% of its value over the year and underperformed for the first time since December 4th 600 USD completed.

Here are some of the biggest factors weighing down the iconic inventory and knocking the world’s richest crown off Elon Musk’s head – the CEO owns roughly 22% of Tesla’s stock.

Fed fears

On Thursday, Fed Chairman Jerome Powell said “upward pressure on prices” and “temporary inflation spikes” could come to the US when the economy reopens after a year of Covid restrictions hitting businesses across the board.

The market is now concerned that interest rates will rise and the government will not be able to take aggressive policies or even control them. Bond yields are rising.

This results in a wider correction in technology stocks, which are valued assuming strong future cash flow growth. As inflation rises, the value of these future cash flows will decrease. As CNBC previously reported, the Nasdaq 100 list of the 100 largest non-financial stocks on the stock market is down about 8% from historic highs it hit three weeks ago.

This affects most of the tech giants. For example, Apple has fallen from about $ 129 to $ 121 since the start of the year, and Netflix has fallen from about $ 523 to $ 516. But Tesla’s drop is steeper so far.

Rivians R1T pickup

Rivian

Cops recognize competition

Some of Tesla’s biggest and most vocal supporters have paid off part of their stake and have finally started to recognize the onslaught of electric vehicle competition as a real challenge for Tesla.

For example, Ron Baron sold 1.7 million Tesla shares and invested in two of the company’s biggest potential competitors, GM-owned Cruise and Amazon-backed Rivian, while paradoxically expecting Tesla shares to eventually climb to $ 2,000 become.

Former Tesla board member Steve Westly said at CNBC’s Power Lunch this week that while he remains optimistic, “Tesla will not forever be the king of the hill when it comes to electricity.” He added, “You have competition from all sectors. You have to double up to keep up.”

In fact, automakers like Ford and Volkswagen have had early success selling their electric vehicles including Mach E and ID.3 versus Tesla models in the US and Europe.

Electric vehicles to come, including the all-electric version of the Ford F-150, Lucid Air, Rivian’s electric SUVs and trucks, and others are causing a stir. Just yesterday, Porsche showed the production version of its Taycan Cross Turismo and said it would start selling in the US this summer. It’s a $ 90,000 EV car, a cheaper and more practical variant of the Porsche Performance EV, the Taycan.

A close-up of a CPU socket and motherboard lying on the table.

Narumon Bowonkitwanchai | Moment | Getty Images

Lack of parts

Semiconductor shortages have resulted in most automakers temporarily closing some lines in their factories, and Tesla is no exception.

Elon Musk, Tesla CEO, confirmed in a tweet on February 25 that the Fremont, California facility has been temporarily shut down. He said it had only been shut down for two days but didn’t make it clear whether it was partially shut down, and some lines would continue.

Tesla had previously warned in its call for results and filing for the fourth quarter of 2020 that chip shortages could affect its vehicle production targets in the first half of 2021.

On the conference call with investors, CFO Zachary Kirkhorn said for the first quarter of 2021:

“”[Model] S and X production will be low due to the transition to the newly revised products. In addition, we are working very hard to address the global semiconductor shortage as well as port capacity which can have temporary effects. “

If Tesla didn’t produce large volumes of vehicles due to a shortage of parts or delays in shipping parts from overseas to its U.S. plants, the company wouldn’t generate as many regulatory credits as it would like. Tesla is selling these environmental credits to other automakers, which has historically generated profitability.

The freight center in the Grünheide region east of Berlin. Tesla plans to build its new European gigafactory in a huge forest nearby.

Patrick Pleul | Image alliance via Getty Images

Steeper expenses

CEO Elon Musk has been controlling costs for years.

In December 2020, he emailed all Tesla employees: “Investors give us a lot of appreciation for future profitability, but if at any point they conclude that this is not going to happen, our stock will immediately become like stock crushed. ” Souffle under a sledgehammer! “

At the same time, Tesla is in an expansion rift that will cost it significantly. The EV manufacturer is building factories in Austin, Texas, in Brandenburg and expanding its presence in China. It has also started redesigning aspects of its Fremont facilities, including the paint shop, the area of ​​the factory where its cars are painted.

Musk also has ambitions for Tesla to mine its own lithium domestically. And to ramp up the production of Tesla’s own battery cells in a pilot plant in Fremont as well.

That effort aside, the company is in the midst of costly recalls and could see more – whether voluntary or mandatory. Most important of these voluntary recalls in China and the United States, Tesla is recalling S and X vehicles that have experienced touchscreen display errors.

– Jessica Bursztynsky contributed to this report.

Correction: Tesla lost 3.78% on Friday.

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Katherine Clark