After Tesla stock lost ‘critical battle line,’ shares plunge toward worst month, quarter and year in history

Shares of Tesla
TSLA,
-8.05%
fell 5.4% to $141.80 on Tuesday after closing lower than $150 for the first time in more than two years Monday, a level the analysts said was a key test of investors’ faith in the stock.

The stock is now down more than 46% this quarter, which would easily be its worst calendar quarter in history, eclipsing a 37.5% decline in the second quarter of this year; and more than 27% for the month of December, which would be its worst month on record, beating a 24.6% decline in December 2010.

The stock is now down 60% so far in 2022 — which would also be its worst year on record — and Tesla’s market capitalization fell lower than $450 billion in intraday trading on Tuesday, pushing it lower than the market cap of Johnson & Johnson for the first time since November 2020. If that change holds through the end of the session, Tesla would be the eighth most valuable stock in the S&P 500 Index
SPX,
+0.10%
after previously ranking as high as No. 5 on that list. For today, Tesla was both the most active and worst-performing stock in the index.

Elon Musk, Tesla’s chief executive, has sold billions in stock to contribute to a selloff since he bought Twitter for $44 billion in October, and has not signaled he is done selling, which the analysts noted was a contributing factor in the cut to the price target.

In-depth: Tesla investors await clues on demand, board actions and weigh downside risks in 2023

“We now know Elon sold another $3.5Bn and we have yet to receive the ‘all done’ tweet,” the analysts said in a note on Tuesday. “The $150-163 technical level was seen as a critical battle line to defend beyond further weakness . . . and failed.”

“Technicals are essentially emotional stock entry points and we’re now at a spot that if you bought Tesla 2 years ago, you have lost money,” they continued.

The Evercore analysts praised Tesla’s margin profile, but said investors “are already well aware of these benefits but now must also battle test demand assumptions” for next year through 2025. They wrote that growth has stalled in China, where Tesla holds about 10% of the electric-vehicle market, and that a “partisan elephant in the room” has become tougher to ignore as Musk tweets out more right-wing rhetoric.

“Investors now fear U.S. brand damage given typical EV buyer demographics (~40% from CA, maybe 70%+ from blue states) in dwindling backlog environment,” the analysts wrote.

The remarks added to concern about shares of Tesla, which suffered their worst week since 2020 last week after Musk disclosed the sale of $3.5 billion in Tesla stock and a large investor, Leo KoGuan, called for new leadership at the electric-vehicle maker. The stock sale marked the second time Musk has unloaded a big chunk of shares of Tesla since he bought Twitter.

Other Tesla analysts this week have expressed increasing frustration with Musk’s activity on Twitter. They said his erratic rule there — which most recently included the temporary suspension of journalists, blocking links to other social platforms, and holding an online poll in which a majority of Twitter users said he should “step down as head of Twitter” — has distracted him from running Tesla. Others have expressed concern that the tumult there, along with the reinstatement of far-right accounts, risked starving the company of ad revenue.

Opinion: Why Tesla investors are the biggest losers in Elon Musk’s Twitter deal

Oppenheimer analysts on Monday downgraded Tesla stock, saying his “non-Tesla endeavors” had become difficult to separate from their analysis of Tesla.

“The combination of Twitter’s unclear cash needs and diminishing options for Mr. Musk to serve those needs amid the broad public backlash driven by inconsistent standards application for Twitter users, notably banning select journalists, is pushing us to the sidelines on TSLA,” the Oppenheimer analysts said.

“We see potential for a negative feedback loop from departures of Twitter advertisers and users due to inconsistent standards resulting in increased financing needs that may lead to incremental TSLA sales just as Tesla’s competitive environment intensifies,” they continued.

Wedbush analyst Dan Ives said in a note on Monday that Musk had been using Tesla shares as “his own personal ATM machine” and that his ownership of Twitter had become an “albatross” for Tesla.

“Time to end this nightmare as CEO of Twitter,” he said.