Elon Musk’s sales warning causes Tesla’s valuation to drop by $80 billion

Tesla saw a significant drop of over 12% on Thursday after CEO Elon Musk’s warning that sales growth would slow this year and subsequent price cuts that have impacted the automaker’s margins. Musk stated that global sales of Tesla might hit a slump, with a focus on a cheaper, next-generation electric vehicle to be made at its Texas factory, expected to drive the next boom in deliveries. However, ramping up production of this new model will be challenging due to the cutting-edge technologies involved.

This warning led to Tesla losing $80 billion in market value on Thursday, pushing its market capitalization loss for the month to about $210 billion. This news also affected other electric vehicle (EV) makers, with Rivian Automotive Inc, Lucid Group, and Fisker seeing a drop in their stock prices.

The EV industry has been facing a slowdown in demand for over a year, and Tesla’s price cuts are likely to worsen the pressure on startups and other automakers. This has led some analysts to note that any significant attempt to boost sales from here on might come at the cost of further falls in operating margin, due to competition with other companies in China and increased competition elsewhere.

At least nine brokerages downgraded Tesla’s stock, while seven raised their ratings. The company’s stock trades at nearly 60 times its 12-month forward earnings estimates, giving it a more premium valuation than other well-known stocks. Some analysts have also pointed out that if Tesla’s sales growth and margin continue to weaken, its valuation could become tough to justify.

Overall, Tesla’s warning and subsequent stock drop have led some analysts to view the company as increasingly resembling a traditional auto company, raising concerns about its future prospects in the market.