Tesla's stock took a sharp nosedive following the much-anticipated reveal of its new Cybercab and Robovan concepts, resulting in a $15 billion drop in CEO Elon Musk's net worth. Investors, who had been eagerly awaiting the company's announcement, were left disappointed by the lack of concrete details on how Tesla plans to execute its ambitious self-driving car strategy, sending the company's shares down nearly 9%.
At the event, Musk introduced the Cybercab, a new autonomous vehicle that could potentially hit the market by 2027 at a price of around $30,000. However, analysts and shareholders were looking for more specific information about production timelines, regulatory hurdles, and how Tesla intends to achieve full autonomy. Without those answers, Tesla's stock quickly declined, falling from $238.77 to $217.80 per share by the end of the trading day.
Musk, whose wealth is closely tied to Tesla's performance, saw his net worth shrink as Tesla's stock price dropped. According to the Bloomberg Billionaires Index, Musk's personal fortune decreased by $15 billion, bringing his total net worth to $240 billion. Despite this steep decline, Musk remains the richest person in the world.
The recent drop in Tesla's stock comes at a time when the company has been touting its advances in artificial intelligence and autonomous driving. However, the excitement around these announcements has been overshadowed by concerns over Tesla's ability to deliver on its promises. "Tesla's stock price has been inflated by future potential rather than current reality, and this event highlighted that disconnect," said Bernstein analyst Toni Sacconaghi.
Sacconaghi also pointed out that much of Tesla's valuation hinges on its less proven ventures, including Full Self-Driving (FSD) technology and humanoid robots, rather than its core automotive business. "The Cybercab reveal didn't provide the kind of near-term revenue drivers that investors were hoping for," he added.
Tesla's stock has faced turbulence in the past due to delays and unmet expectations. Earlier in 2023, Musk had delayed Tesla's "We, Robot" event, which also caused a 7% drop in Tesla shares. The stock had been steadily recovering until this latest stumble, but it now sits significantly below its earlier highs. In July, Tesla shares were valued at around $240, and Musk's wealth had climbed above $250 billion. However, the stock's continued volatility has sparked renewed concerns about Tesla's long-term outlook.
The sharp decline in Tesla's stock also follows increased competition in the electric vehicle (EV) market. Traditional automakers like General Motors and Ford have ramped up their EV production, challenging Tesla's dominance in the sector. Tesla's global market share in EVs has been gradually shrinking as new competitors enter the space, putting pressure on the company to maintain its lead while navigating its high-tech ambitions.
Musk's announcement of a $30,000 Cybercab was meant to generate excitement about the company's future, but analysts have expressed skepticism about Tesla's ability to meet its ambitious targets. Garrett Nelson, an analyst at CFRA, described the event as "like watching a movie with a lot of plot twists and special effects, but by the end, you're left scratching your head." He added that Tesla's promises of self-driving cars have yet to materialize, and investors are starting to question the company's ability to turn its ideas into reality.
The decline in Tesla's stock has also sparked broader concerns about the company's fundamentals. Tesla reported a sharp decline in its operating margins in recent quarters, dropping from 14.6% two years ago to just 6.3% in the second quarter of 2024. This margin erosion has raised questions about how Tesla will sustain its profitability, especially with increased competition and shrinking demand for its higher-end models.
Tesla's third-quarter earnings, scheduled for release on October 23, will be a critical moment for the company as investors look for signs of recovery. Guggenheim analyst Ron Jewsikow noted that Tesla's valuation is increasingly out of sync with its current business performance, saying, "A business trading at 100 times next year's earnings, with little to no free cash flow, is really difficult to justify."
