Tesla Stock Forecast: Why a Double-Digit Plunge Could Be on the Horizon

Stocks to sell

Tesla stock (NASDAQ:TSLA) dominated the global market for electric vehicles just two years ago. It had enormous margins, which it plowed into new plants and new technology. It was worth a premium price.

All that is gone now. Thanks to the distraction of the CyberTruck, and losing its lead in batteries, Tesla created its own downfall.

The coming layoffs and losses can’t be excused by Tesla stock bulls. They aren’t fully appreciated by bears, either.

If Tesla really is just a car company, and no longer a pioneer in Electric Vehicles (EVs), what’s it worth?

GM vs. Tesla

The answer is, not much.

Consider General Motors (NYSE:GM). It had sales of $172 billion last year, up nearly 10%. Over $10 billion became net income. It’s worth just $50 billion and carries a price to earnings (PE) ratio of just 6. The average analyst at Tipranks sees a 15% gain in it over the next 12 months.

Now look at Tesla. Sales were $96 billion last year. Net income was about $15 billion. Those are good numbers, but Tesla is also worth $492 billion, nearly 10 times more than GM.

Now consider that, at least in the current quarter, GM is growing, while Tesla is not. GM will have electric SUVs priced at just $30,000 next year, and plans to make money at that price. Tesla was said to have three new models coming out next year, but has backed away in favor of a “robo-taxi” with full self-driving no one (save the most bullish) really believes in.

Still think Tesla is worth 10 times more than GM?

The Posse is Coming

The global auto industry has had 5 years to match Tesla, and it has caught up. The global industry is now saying “25 in 25,” meaning $25,000 EVs will be coming to American roads in 2025.

China’s EV market, once dominated by Tesla, is now ruled by Chinese brands like BYD (OTCMKTS:BYDDF). Korea’s Hyundai (OTCMKTS:HYMTF) will be making 300,000 EVs in Georgia next year, and even more batteries. BMW (OTCMKTS:BMWYY) has 4 EVs getting good reviews.

Volkswagen (OTCMKTS:VWAGY), said to be falling behind in EVs, will have a $27,000 model out next year. Even Ford Motor (NYSE:F) is planning a sub-$25,000 EV.

Tesla’s Strengths

This doesn’t mean Tesla lacks strengths that offer a premium over GM, even if its profits come up short.

The company is a leader in packing batteries. It laps the field when it comes to extracting money from customers after they drive off the lot. Service, insurance, and software are all great profit centers.

There’s also the SuperCharger network, which has seen off all challengers to become the North American standard.

But I’m not paying $500 billion for a gas station.

The Bottom Line

Against all that stands the figure of Elon Musk himself. I had my doubts back in 2021. I have seen nothing since to change my mind.

Great wealth brings with it great responsibility. If your only interest lies in yourself, you deserve to lose it. I wouldn’t invest a dollar in Elon Musk, and you shouldn’t either.

That doesn’t mean Tesla stock is worthless, or that it’s only a short. It is worth more than General Motors, even though it’s smaller. But is it worth more than Toyota (NYSE:TM), where growth is stagnant, net margins are just 6.6%, but sales of $241 billion give it a market cap of $393 billion?

I don’t think so. This means Tesla should fall at least another 20% from here. From there, who knows? No other global auto maker is worth even $100 billion.

It will take time to get there, but when Tesla falls to its fundamental value, Tesla bulls will be hitting you up for a loan.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his free Substack newsletter.

Articles You May Like

SBUX Sell Alert: Starbucks Stock Is Likely to Get Worse Before It Gets Better
Ride Out the Turbulence: 3 EV Stocks to Own for Massive Wealth Creation
This up-and-coming cancer treatment could be a $25 billion market opportunity — it’s already a hotbed for M&A
Tesla Stock Warning: Don’t Bother Trying to Fix This Flat Tire
3 Sorry Gambling Stocks to Sell in May While You Still Can