- Tesla, Inc. is facing a persistent slowdown in demand and increased competition in the EV market, impacting its pricing strategy.
- The company has experienced significant declines in all key metrics, including negative revenue growth and FCF deterioration.
- Despite price cuts, Tesla has seen a decline in total deliveries, particularly in China, where competition and geopolitical tensions pose risks.
- Many rounds of job cuts have also been implemented, implying a cautious growth outlook in the mid and long term.
- The stock is still trading at a premium valuation of 74x P/E FTM after almost 30% selloff YTD.
Investment Thesis
Tesla, Inc. (NASDAQ:TSLA) is facing a significant slowdown in demand despite a series of price cuts, partially due to cyclical headwinds in the U.S. electric vehicle (EV) market. The EV market has become increasingly competitive, with more players introducing their own electric vehicles, which is impacting Tesla’s pricing strategy. I think a structural demand slowdown for Tesla vehicles cannot be ruled out unless they can differentiate themselves among competitors.
In my previous article, I maintained a sell rating due to deteriorating gross margins and sluggish demand following those price cuts. Since then, the stock has declined by over 30% as TSLA’s fundamentals show no signs of improvement. Meanwhile, the stock continues to trade at a lofty valuation. Therefore, I reiterate my sell rating. Particularly, Tesla’s revenue growth turned negative for the first time since 2Q FY2020.
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