Tesla Faces 15% Drop, Demand Worries Push Stock to New Lows

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Tesla's stock (TSLA) dropped more than 15% on Monday, marking its lowest point since before the presidential election and more than 50% off its record high of $479 set on December 17. This represented the stock's worst day since September 2020.

The decline followed a bearish note from analysts at UBS, who reduced their price target for Tesla from $259 to $225, citing weaker demand for Tesla’s Model 3 and Model Y vehicles. UBS now forecasts the company will deliver 367,000 cars in the first quarter, down from the previous estimate of 437,000. They also expect deliveries to fall 5% year-over-year and 26% from the previous quarter. Their analysis, based on UBS Evidence Lab data, points to low delivery times for both models (generally within two weeks), which they believe indicates softened demand.

Tesla’s stock was also pressured by news that shipments to China dropped 49% year-over-year in February, reaching the lowest level in almost three years. With Monday's decline, Tesla has erased all its post-election gains, marking another part of the ongoing unwinding of the "Trump trade" that has been driving market trends recently.

Since the start of March, Tesla’s stock has fallen by about 18%.

Despite the sharp drop, some of Tesla’s biggest supporters have come to its defense. Last Thursday, Wedbush analyst Dan Ives reaffirmed his bullish stance on Tesla, calling this downturn a "gut check" for Tesla bulls. Ives kept Tesla on the firm’s "Best Ideas List," maintaining an Outperform rating with a $550 price target. He noted that similar setbacks have occurred in Tesla’s history, where negative sentiment has overshadowed its disruptive potential.

Similarly, Morgan Stanley’s Adam Jonas reiterated his optimistic outlook, predicting that Tesla shares could reach $430 as the company expands into artificial intelligence and robotics. He described Tesla’s shift from a pure automotive company to a more diversified tech play as an opportunity for investors.

However, challenges for Tesla are mounting, with increased competition eating into its sales and CEO Elon Musk’s political involvement attracting controversy. Musk’s role as a prominent surrogate for Trump during the 2024 campaign has led to protests, and registration data shows declining sales in Europe. A January Quinnipiac poll also revealed voter disapproval of Musk’s political involvement, with 53% opposing his prominent role in the Trump administration.

Tesla is set to report its first-quarter earnings on April 22.

Paraphrasing text from "Reuters" all rights reserved by the original author