2022 and 2023 have been tumultuous years for Tesla investors. In 2022, Tesla’s stock price fell by as much as 70%. This was equivalent to more than $700 billion being wiped out from Tesla’s market cap.
A couple of main reasons contributed to Tesla’s decline in 2022. The first is a higher interest rate environment which has shifted money from stocks to bonds. This has caused a lull in the entire stock market with the worst affected being growth stocks with higher multiples. There isn’t much Tesla can do about this.
And the second reason for the massive fall in Tesla’s stock price was Elon Musk’s deal to buy Twitter. Arguably, this might even be a bigger contributor to the fall in Tesla’s stock price than higher interest rates.
Elon Musk has recently admitted that his Twitter deal was particularly painful as it forced him to sell billion of dollars worth of Tesla stock. And Musk says that contributed to the massive fall in Tesla’s stock price in 2022.
In addition to directly contributing to the fall in Tesla’s stock price by selling billions of dollars in TSLA shares, Musk’s involvement in the social media platform has also negatively affected Tesla due to the polarizing political nature of Twitter and sentiment that Musk is distracted by his obligations at the social media platform.
Tesla's stock price performance this year has also been mixed, with the stock rising leading up to Tesla's Investor Day presentation on March 1st, 2023. The event was themed around Musk's "Master Plan 3," which is a long-term plan toward sustainability that involves electric cars and other clean energy products.
The most “concrete” announcement from the event was Tesla's plan to build a new Gigafactory in Nuevo Leon, Mexico to produce its next-generation, cheaper electric vehicles. It will be Tesla's fifth car manufacturing facility in the world. Musk also introduced his leadership team to the public and most of them for the first time.
Tesla, at the event, also unveiled its third-generation vehicle platform. The Gen-3 platform is a radical rethink of the final assembly of vehicles, and along with Tesla's advancements in battery cells, structural battery pack, and drive train efficiency, will enable the company to reduce the cost of building vehicles by 50%.
Personally, I found Tesla’s step-by-step walkthrough of how they plan to cut down the cost of building a vehicle extremely fascinating. However, Wall Street was more disappointed by the lack of new product announcements and Tesla’s stock price started to fall back once again.
This decline was further exacerbated by Tesla’s less-than-stellar Q1 2023 financial results announced on April 19. Although Tesla’s business has grown in so many ways, the EV maker also reported a substantial decline in automotive gross margin, operating gross margin, and free cash flow.
This coupled with earlier concerns about waning demand for Tesla vehicles and substantial price cuts for the company’s products, Tesla’s stock price fell sharply following the earnings report.
Since then, Tesla’s investor base has been in a bit of a raucous, with arguments breaking out on whether Tesla should start advertising in order to drum up demand, whether Tesla should cut the price of FSD to improve uptake, and whether the overall direction the EV maker is heading in is correct.
And in an apparent attempt to calm the discontent in the Tesla community, Farzad Meshabi, from the namesake YouTube channel wrote on Twitter saying “There was a 4-year period of time, between 2015 and 2019, where being a $TSLA investor was absolute hell. I used that time to retest my thesis every day. The last few quarters, and likely the following quarters, are very reminiscent of that time. Don’t be afraid to get uncomfortable.”
Musk responded to Farzad’s tweet writing “There have been several extended periods of flatness, followed by rapid rises to new plateaus.”
There have been several extended periods of flatness, followed by rapid rises to new plateaus— Elon Musk (@elonmusk) April 23, 2023
Musk’s response appears aimed at reminding the retail Tesla investor base of the stock’s massive gains over the years. For any investors whose belief in Tesla’s continued growth has been shaken by recent stock performance, Musk also showed the pattern Tesla’s stock price moves by pointing out the rapid rise, and extended plateau phase of the stock.
Musk’s advice appears to be geared at promoting long-term thinking when investing in Tesla stock. And Musk's advice is supported by the data. Ignoring all the ups and downs and the drama involved in Tesla, if we go back to the IPO, we see that Tesla is up 12,800% in the past 13 years.
To put this into perspective, a person who invested $10,000 at the IPO will now be worth an incredible $1.28 million. And this is after the more than 60% decline in Tesla’s stock price since its peak in November 2021.
Although not financial advice, currently, it appears Musk is correct and is wise to invest in Tesla for the long haul. Having said that, we will keep you posted on the company’s growth and execution going forward.
Until then make sure to follow our site torquenews.com/Tesla regularly for the latest updates.
So what do you think? Do you agree with the direction Tesla is heading as a company? Also, do you support Musk’s advice to take a longer-term view of Tesla’s stock price? Let me know your thoughts in the comments below.
Image: Courtesy of Tesla
For more information check out: ARK Invest & Cathie Wood’s New Research Gives Tesla A $6.3T Market Cap
Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.