After stock collapse, is Tesla still magnificent?

After stock collapse, is Tesla still magnificent?

If you’re building a list of the most important stocks in the market, Tesla has to be on it. Or does it? That’s part of a growing debate on Wall Street, where shares of Elon Musk’s electric-vehicle maker are tanking as the rest of the market rallies – and the company is warning that things may not get better for a while.

An original member of the so-called Magnificent Seven tech stocks that have been driving the S&P 500 Index to new heights, traders are now wondering if Tesla’s name belongs next to those other powerhouses. After doubling last year, Tesla’s stock price is down 22% to start 2024.

Compare that to Nvidia Corp’s 46% surge or Meta Platforms’s 32% gain since the beginning of the year and it’s easy to see where the questions are coming from. It’s by far worst performer in Magnificent Seven Index this year.

The problem for the EV-maker is six of those seven companies are benefiting from the enthusiasm surrounding burgeoning AI tech. The group hit a record 29.5% weighting in the S&P 500 last week even with Tesla’s decline, according to data compiled by Bloomberg.

But despite Musk’s efforts to position his company as an AI investment, the reality is Tesla faces a unique set of challenges. “Although Elon Musk would probably disagree, investors don’t see Tesla as an AI play like most of the other Magnificent Seven stocks,” said Matthew Maley, chief market strategist at Miller Tabak + Co. “We have a different backdrop for Tesla and the others in the Mag Seven – demand trend for Tesla products is fading.”

Dimming Outlook

At the heart of this divide is the dimming outlook for EVs. Demand is expected to slow in 2024, and perhaps beyond, raising doubts about Tesla’s ability to grow at the rapid pace investors are accustomed to seeing. “Being a one-product company and mismanaging the timing of product cycles can create periods of pain.”

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