Tesla stock on track for worst year ever

Owning Tesla shares this year has been anything but a smooth ride for investors.

Shares of the electric vehicle maker are down nearly 70% year-to-date, on track to end in the five biggest declines among S&P 500 stocks. By comparison, the benchmark is down by about 20%.

As Tesla has continued to increase profits, signs of slowing demand and increased competition are increasingly worrying investors. And then there’s CEO Elon Musk’s acquisition of Twitter.

Some of Musk’s actions since taking over the social media company, including removing a content moderation framework created to tackle hate speech and other issues on the platform, have baffled advertisers from Twitter and disabled some users.

This has fueled concerns on Wall Street that Twitter is getting too much attention from the billionaire and could offend loyal Tesla customers.

Musk’s acquisition of Twitter sparked a political storm and damaged Musk and Tesla’s brand, leading to a « complete debacle for the stock, » Wedbush analyst Dan Ives wrote in a research note this week.

Musk said he plans to stay on as CEO of Twitter until he can find someone willing to replace him in the job.

Despite Musk’s focus on Twitter, Tesla’s results have been strong this year. The Austin, Texas-based company posted year-over-year profit and revenue growth in the first three quarters of 2022, including doubling its third-quarter profit from a year earlier .

Still, electric vehicle models from other automakers are beginning to reduce Tesla’s dominance in the U.S. electric vehicle market. From 2018 to 2020, Tesla held around 80% of the electric vehicle market. Its share fell to 71% in 2021 and has continued to decline, according to data from S&P Global Mobility.

This month, in a rare move, Tesla began offering discounts through the end of the year on its two best-selling models, a sign that demand is slowing for its electric vehicles.

Ives predicts Tesla will likely miss Wall Street estimates when the company reports fourth-quarter results, citing higher inventory levels, recent price cuts and overall production slowdowns in China. He also expects a « smoother trajectory for 2023 ».

“The reality is that after a Cinderella story demand environment since 2018, Tesla faces serious macro and enterprise specific competitive headwinds through 2023 that are beginning to emerge in the US and in China, » Ives wrote.

Still, Ives is optimistic that Tesla’s long-term prospects remain strong as the global electric vehicle market grows — and Musk is refocusing on Tesla.

« However, any other strategic missteps by Musk will be carefully considered…and will weigh further on stocks, » he wrote.