Some of Tesla's (TSLA) institutional shareholders are exiting their positions, convinced that the electric carmaker's days of rapid growth are over. The company's shares have declined nearly 30% this year and have lost more than 50% of their value since their 2021 high, erasing about $600 billion in market capitalization. CEO Elon Musk has struggled with increasing competition and declining sales. Tesla's first-quarter results missed analysts' expectations, although Musk promised more affordable models by 2025. John Belton, a portfolio manager at Gabelli Funds, expressed concerns about the stock's fundamentals, leading his firm to sell all of its 65,900 shares in the first quarter.
Tesla's nearly 14-fold increase in stock value over the past five years has conditioned investors to hold on through adversity, but even some of the company's most loyal supporters are now skeptical. Morningstar data shows that 10 out of 18 mutual funds holding Tesla since 2019 reduced their positions last quarter, with four cutting their stakes by 15% or more. Despite this, Wall Street analysts remain optimistic, with 19 out of 49 analysts tracked by LSEG giving the stock a "buy" or "strong buy" rating. The average price target is $178.95, slightly above the current closing price.
Market Overview:- Institutional shareholders are reducing their positions in Tesla, citing concerns about future growth.
- Tesla's stock has dropped nearly 30% this year and over 50% since its 2021 peak.
- Wall Street analysts maintain a positive outlook, with many rating the stock as a "buy" or "strong buy."
- Tesla's stock decline is attributed to increased competition and falling sales.
- Loyal investors, like Ross Gerber, are reducing their stakes, doubting future growth prospects.
- Despite skepticism, Tesla remains the world's most valuable automaker with a $560 billion market cap.
- Tesla's high valuation compared to traditional automakers raises questions about its sustainability.
- Elon Musk's focus on self-driving technology and AI could be pivotal for future growth.
- Analysts like Dan Ives and Cathie Wood continue to support Tesla's long-term potential.
Ross Gerber, an early investor, has reduced his Tesla holdings from 500,000 to around 300,000 shares, citing concerns over Musk's distractions and the company's public relations strategy. He values the stock at $100 per share, significantly below its current price. Gerber plans to donate or use the remaining shares to sell put options to mitigate tax consequences. Despite these challenges, Tesla remains the world's most valuable automaker with a market cap exceeding $560 billion, though it trades at a high multiple of future earnings.
Bullish investors justify Tesla's valuation by pointing to its technological advancements and strong fan base. Recent optimism stems from the company's push into fully autonomous driving and its expansion in China. Dan Ives of Wedbush Securities believes Tesla's long-term growth story will emerge, with self-driving technology playing a key role. Cathie Wood of Ark Invest has increased her stake, maintaining a price target of $2,000 per share by 2027, driven by the potential of Tesla's robotaxi business. However, critics argue that self-driving technology faces significant challenges, and some investors, like Graham Tanaka, are shifting their focus to more promising opportunities like Nvidia (GS).
