Elon Musk’s Tesla Shares Plummet As Company Faces Market Valuation Dip Below $500 Bn Amid Layoffs

Tesla shares: On Tuesday, Tesla shares closed down by 2.7 per cent at $157.11 on the New York Stock Exchange, hitting a low of $153.75 during the session

Tesla shares: The announcement of layoffs, coupled with the departure of two key executives, signaled significant demand risks for the company, analysts pointed out.

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Tesla Inc. witnessed a continued drop in its shares throughout 2024, as the electric-vehicle giant's market valuation briefly dipped below $500 billion. This plunge was accentuated by a round of job cuts that underscored the significant slowdown in the company's growth trajectory, according to a report by Bloomberg.

On Tuesday, Tesla shares closed down by 2.7 per cent at $157.11 on the New York Stock Exchange, hitting a low of $153.75 during the session. Year-to-date, the stock has plummeted by 37 per cent, marking it as the second-biggest decliner on the S&P 500 Index. This decline has wiped out approximately $290 billion in shareholder wealth. Notably, Tesla hadn't closed with a market value under $500 billion since late April of the previous year, clinging narrowly above this threshold as of Tuesday's close.

Ryan Brinkman, an analyst at JPMorgan Chase & Co., highlighted the broader implications of Tesla's recent job cuts, stating, "The retrenchment in employment and capacity has far-reaching implications for the hypergrowth narrative still embedded in Tesla’s share price, suggesting material downside risk for the stock."

The announcement of layoffs, coupled with the departure of two key executives, signaled significant demand risks for the company. Analysts pointed out that these developments, alongside Tesla's decision to abandon plans for a cheaper electric vehicle in favour of a "robotaxi," have raised concerns about its future growth prospects.

Elon Musk, CEO of Tesla, disclosed plans to unveil the company's robotaxi in August, pointing out a shift in focus amidst a rapidly dimming profit outlook. Tesla has been consistently reducing vehicle prices to stimulate demand, further exacerbating concerns among investors.

David Wagner, a portfolio manager at Aptus Capital Advisors, noted the market's skepticism regarding Tesla's ability to reignite growth through a lower-cost platform, especially considering existing alternatives such as China's BYD, which offers a $25,000 electric car.

Tesla's struggles come at a time when Chinese EV-maker BYD Co. surpassed it as the world's largest seller of electric cars in late 2023. Despite not operating in the US market, BYD's line-up of affordable electric vehicles poses a significant challenge to Tesla's dominance.

With Tesla's first-quarter results scheduled for April 23, investors are eagerly awaiting explanations for the company's strategic shifts amid dwindling growth prospects. The outcome of these results will significantly impact Tesla's trajectory amidst a challenging market environment.

Meanwhile, Musk is scheduled to visit India later this month for a significant meeting with Prime Minister Narendra Modi. Musk intends to unveil plans regarding investments and the establishment of a new factory in the country during his visit.