If you invested Tesla (NASDAQ:TSLA) at the beginning of 2024, you’re probably pretty disappointed right now. Maybe you’re hoping for a spectacular recovery, though. That’s your decision to make, but after weighing the evidence, we’re still maintaining a “D” grade for Tesla stock with a large dose of caution.
We’ve already warned you that Tesla CEO Elon Musk is distracted as he’s busy with his leadership duties at X (formerly known as Twitter), SpaceX, Neuralink and the Boring Company. Now that the first quarter of 2024 is in the history books, it looks like the bullish argument for TSLA stock hasn’t gotten any stronger.
Tesla Stock: Not So Magnificent, After All
At this point, it’s getting harder to defend Tesla as a “Magnificent Seven” member. This is supposed to be an elite group of outperforming names, but Tesla stock declined 29.24% during this year’s first quarter.
There’s really no excuse here, since the S&P 500 rallied 10.79% during that same time frame. So, don’t be surprised if the next iteration of the “Mag-7,” whatever that might be, doesn’t include Tesla.
Frankly, the outlook isn’t stellar for Tesla. At the beginning of 2024, analysts forecast that Tesla would earn around $3.80 per share for the full year. More recently, that forecast dropped to slightly less than $2.90 per share.
Furthermore, we’ve learned that Tesla is now diving headfirst into advertising after having resisted it for years. This appears to be a sign of slowing EV demand — or at least, slowing demand for Tesla’s vehicles in particular.
Tesla’s Model 3 Now Has a New Rival
In case you didn’t get the memo, Tesla faces very strong EV market competition in China. Indeed, China-based smartphone manufacturer Xiaomi (OTCMKTS:XIACF) just threw its hat in the ring with the SU7 electric sedan.
The SU7, which is short for Speed Ultra 7, costs less than $30,000 for the base model. This makes the SU7 significantly cheaper in China than Tesla’s Model 3, which starts at approximately $34,000 in that country.
As you may recall, Musk declared that Chinese EV firms will “demolish” their rivals if trade barriers aren’t established. So, is Xiaomi about to “demolish” Tesla with this new, affordable EV model?
Only time will tell, but this development only adds to Tesla’s headaches in China. Maybe Musk believes that Tesla can destroy its competition through price cuts. That tactic might work sometimes, but as we’re seeing, China-based automakers like Xiaomi may beat Tesla at its own game.
Tesla Stock Investors Face a Tough Road Ahead
Don’t get the wrong message here. We’re not suggesting that Tesla and Musk are doomed. What’s important right now is that investors should weigh Tesla’s challenges against the company’s opportunities.
At this moment, Tesla has to overcome major challenges, including fierce competition in China. The outlook for Tesla is unclear after a poor share-price performance in the first quarter. We’re assigning Tesla stock a “D” grade and withholding a confident buy recommendation.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
