Tesla ($TSLA) shares nosedived by as much as 8% today, erasing billions from the automaker’s market capitalization and pulling its valuation below the critical $1 trillion mark. This latest decline comes as concerns over slowing profit growth and disappointing vehicle deliveries weigh heavily on investor sentiment.
Tesla’s Profit Warning Becomes Reality
CEO Elon Musk previously cautioned that Tesla’s stock could be “crushed like a soufflé being smashed by a sledgehammer” if profits failed to keep pace. That warning appears to be materializing as analysts scramble to slash earnings expectations for the first quarter, citing lower-than-expected vehicle sales and intensifying competition.
Plummeting European Deliveries Fuel Investor Anxiety
One of the biggest red flags is Tesla’s declining sales in key markets, particularly in Europe. Reports indicate that Tesla’s vehicle deliveries in the region have plummeted by nearly 50% year-over-year, reflecting growing competition from local EV makers and a slowdown in consumer demand. With China also presenting its own set of challenges, Tesla’s ability to maintain its growth trajectory is being called into question.
Valuation Concerns: Tesla Still Expensive?
Despite today’s selloff, Tesla’s price-to-earnings (P/E) ratio remains at an eye-watering 150, far exceeding that of traditional automakers like Toyota, which trades at just 7. Even leading tech companies such as Meta, with a P/E of 40, appear comparatively undervalued. This has led some analysts to suggest that Tesla’s stock may still be overpriced relative to its earnings potential.
Hope on the Horizon? FSD Expansion and Robotaxi Launch
Tesla is not standing still in the face of these challenges. The company launched a new Full Self-Driving (FSD) update in China today, which could unlock deferred revenue and provide a much-needed financial boost. However, early user feedback has been mixed, leaving questions about whether the update will be enough to restore investor confidence.
Looking ahead, all eyes are on Tesla’s upcoming robotaxi fleet launch, slated for June in Austin. While some bulls believe this could reignite enthusiasm around Tesla’s AI and autonomous driving capabilities, skeptics argue that the initiative may serve as a distraction from the company’s broader financial struggles.
With analysts continuing to downgrade delivery and earnings forecasts, Tesla’s stock could face additional turbulence in the weeks ahead. Investors will be closely monitoring whether the company can turn things around—or if today’s selloff is just the beginning of a larger correction.
