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Why is Tesla stock falling? 2023 begins with 14% decline

By:
on Jan 4, 2023
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  • Tesla closed 2022 down 68%, the fourth worst performing stock of the S&P 500
  • The stock plunged another 125 on Tuesday off the back of a disappointing delivery report
  • Goldman Sachs analysts say report is only “incremental negative”, but 2023 remains a pivotal year

I wrote a piece only two weeks ago analysing the collapse of Tesla stock. As I wrote, it was trading at $138, down 64% on the year. By the time we all pushed our bodies to endure one more night out on New Year’s Eve, Tesla was trading at $123, officially closing for the year 2022 down 68%. Ouch.

A couple days into 2023, it has showed no signs of breaking its pattern, cratering down another 12% on Tuesday.

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Tesla drops after disappointing delivery numbers

The latest plunge came off the back of disappointing vehicle production and delivery numbers for Q4, which missed analysts’ expectations.

The automaker reported over 405,000 deliveries for the quarter and 1.31 million total deliveries for the year. While both of these were Tesla records – and amounted to a 40% increase on delivery numbers from 2021 – the metric still fell short of the 427,000 expected for the quarter.

The news is just the latest blow to the embattled car-cum-technology company. It was the fourth worst performing stock of the S&P 500 – and this was a year that brought some intense competition.

What next for Tesla in 2023?

Looking forward, the most important factor remains the tight monetary policy of central banks around the world, which has pulled down stock returns by rising interest rates in the hope of curtailing relentless inflation.

These higher rates mean profit expectations in future are discounted back more aggressively, hurting the valuation of stocks. It also means that there is an alternative for investors to store wealth, with the Fed funds rate now 4.25%-4.5%, compared to 0% not so long ago.

Regarding this report, however, on a holistic basis it is not overly negative. Short-term earning expectations are just – short-term. The numbers still represent strong growth, with Goldman Sachs analysts outlining the delivery report is merely an “incremental negative”.  

Then again, with recession fears growing as core inflation remains persistent, there could also be a dent in demand for Tesla cars this year, if the Fed is to persist with its hawkish policy. As always, however, predicting the monetary policy of the Fed is a difficult game to play….

Elon Musk may have got some things wrong, but the polarising billionaire was right on one count: