Can This 'Magnificent 7' Underperformer Climb As High As It Did Last Year?

Written By Michael Gary Scott






Assessing Tesla: A Stock on the Brink of a Turning Tide

Analyzing the Magnificent Seven: A Comparison to Last Year

The “Magnificent Seven” group of stocks, Apple, Amazon, Microsoft, Tesla, Google’s parent company Alphabet, Meta Platforms (formerly Facebook), and Nvidia, have been the darlings of the U.S. tech sector. While their performance this year pales in comparison to the dazzling heights of 2023, with a few exceptions, they have outperformed the S&P 500 index.

  • Apple: down 11.5%
  • Amazon: up 17.9%
  • Alphabet: up 22.8%
  • Meta Platforms: up 23.8%
  • Nvidia: up 75.6%
  • Microsoft: up 8.7%
  • Tesla: down 31.3%

Tesla, the electric vehicle giant, has maintained its position despite turbulent times in the industry. Last year, Tesla soared in value, surpassing the overall market gain. Nonetheless, recent challenges have weighed on its financial standing.

The Rise and Fall of Tesla: A Tale of Quarter 1, 2024

In the first quarter of this year, Tesla fell short of revenue and earnings estimates, a development that usually sends a stock plummeting. Yet, to many analysts’ surprise, Tesla’s stock has been on the rise. Despite a 9% decline in total revenue to $21.3 billion, the company struggles to meet the market’s expectations.

Tesla’s deliveries dropped to 387,000 vehicles in Q1 from 484,000 in Q4 2023. However, segments like energy generation and storage saw slight upticks, while automotive revenue, Tesla’s primary profit driver, took a significant hit.

The company cited lower selling prices, production disruptions, and fierce competition in China as the main culprits behind its revenue woes. Despite aggressive price cuts, rising inventory levels and AI investments have led to a negative cash flow.

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Elon Musk’s Balancing Act: The Muskian Magic

Elon Musk, Tesla’s enigmatic CEO, made headlines with plans for global layoffs and a controversial $56 billion compensation package. Investors are divided on the sustainability of Tesla’s valuation, especially as Musk promises breakthroughs like the “purpose-built robotaxi or Cybercab.”

Tesla’s current valuation at 66 times the forward 2024 earnings has left Wall Street cautious, with predictions of a 17.4% earnings dip for the year. The stock’s future is uncertain, as analysts maintain a neutral stance with wide-ranging price targets.

Deciphering Analyst Sentiments on Tesla Stock

Analysts offer a mixed bag of recommendations for Tesla stock. With predictions aligning closer to a turbulent year but brighter future ahead, the stock’s path remains shrouded in uncertainty. The $56 billion CEO pay package and ongoing financial struggles paint a challenging picture for Tesla investors.

The Turn of the Tide for Tesla Stock

While 2024 poses challenges, analysts foresee a potential turnaround in 2025 with projected revenue and earnings growth. Yet, with mounting issues such as declining revenue and an overvalued stock, caution is advised when considering Tesla as a growth investment.