Tesla sold fewer cars in 2024 than it did the year before. Yet the company is worth about 53% more now.
Don’t think about it too hard. Car sales aren’t really what the company’s value is based on anymore.
The revved-up EV maker appeared to start the new year off on a bum note Thursday, with its stock taking a hit following disappointing vehicle delivery numbers for the fourth quarter. Tesla said it delivered 495,570 vehicles for the period, which was about 3% shy of the 512,300 deliveries projected by analysts, according to consensus estimates from Visible Alpha. The fourth-quarter results brought Tesla’s deliveries for the full year to 1.79 million, which was down from the 1.81 million vehicles delivered in 2023, and the first annual sales drop the company has ever seen, according to Visible Alpha data.
The full-year decline isn’t shocking, given the sharp slump in EV sales industrywide that started early last year. But it bears reminding, now that Tesla is a $1.2 trillion company worth more than the next 20 largest automakers combined, according to data from S&P Global Market Intelligence. And that is with the stock taking a 6.1% hit on Thursday. Tesla’s share price soared 63% in 2024 even as the auto business that accounts for more than 80% of its annual revenue was experiencing its worst year on record.
Such is the draw of the artificial intelligence narrative—enhanced by the star power of Elon Musk. The Tesla chief executive frequently touts Tesla’s prowess in AI as the company develops self-driving technology and robotics. He also effectively used his platform now called X to tweet his way into the White House by enthusiastically supporting the election of Donald Trump. The majority of Tesla’s share-price gains in 2024 came after the Nov. 5 election.
That alone sets a high bar for the stock in the coming year. Tesla also now commands a notable premium even compared with companies already making serious money on AI. Even with Thursday’s slip, Tesla’s shares trade at about 117 times projected earnings for the next four quarters. That is more than three times the multiple of AI champ Nvidia, and a sharp premium to other tech giants valued at more than $1 trillion.
Hence, Wall Street is a bit dubious. A little over half the analysts covering Tesla rate the stock as a sell or hold, and the shares trade at the widest premium over analysts’ median price target in at least five years, according to FactSet data. In a report last month after Tesla’s market cap peaked above $1.5 trillion, Chris McNally of Evercore ISI said about $1 trillion of that was implied for revenue from “things to come.” Joseph Spak of UBS reached a similar conclusion in a report in November, arguing Tesla’s stock “is mostly driven by animal spirits/momentum” while cautioning that the shares have historically gone into a “downward channel” in past periods after the company’s market value pulled well ahead of fundamentals.
At the very least, the coming year will need to show Tesla hitting ambitious milestones in self-driving technology in order to justify investors’ hopes for a robotaxi business getting off the ground. That alone is no sure thing. In a report Wednesday, Truist analyst William Stein reviewed the latest version of Tesla’s full self-driving software, which he called “more impressive” than past versions. But he also noted that “imperfections remain obvious and prevent us from recommending its use.”
Until its AI applications gain real traction, a trillion-dollar Tesla likely faces an even bumpier road ahead.
Source: https://www.wsj.com/business/autos/tesla-stock-share-prices-declining-car-sales-eadad14a?st=eHhNoD
