Big news for Tesla stock investors!

Tesla has just quietly dropped a key target it set for itself just a few years ago. What does this mean for owners of Tesla stock?

| More on:
Electric cars charging at a charging station

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Tesla (NASDAQ: TSLA) stock has lost over a quarter of its value this year as the electric vehicle (EV) trailblazer faces a multitude of challenges.

Higher interest rates are making it more expensive for consumers to finance the purchase of cars, leading to slower sales. And rival Chinese manufacturers like BYD are offering feature-rich EVs at bargain prices.

Plus, US-China trade tensions are rumbling on, while CEO Elon Musk is threatening to build artificial intelligence (AI) and robotics projects away from Tesla if he isn’t given 25% voting control.

Now, the company has also dropped a key aspiration. What’s going on here? And as a shareholder, should I be worried by all this?

The news

In 2020, Tesla said it aimed to sell 20m vehicles by the end of the decade — double the amount of Toyota. Essentially, this was Tesla telling the world that it intended to become the largest carmaker in the world.

However, in its annual impact report released on 23 May, the company omitted this 2030 delivery goal.

Of course, Musk is famous for his overly ambitious targets. His strategy is very much aim for the stars, and even you miss, you’ll land on the moon. So investors normally take his deadlines with a bucket of salt.

Nevertheless, the omission is noteworthy. Is it because the firm is really going all-in on robo-taxis? Is the long-promised, mass-market model now permanently off the table? We don’t know for sure.

Being realistic

What we do know is that there is a snowball’s chance in hell of achieving the original target anyway. Tesla delivered 1.8m cars in 2023, which represented solid sales growth of 38% over 2023.

However, that was well under its previously stated long-term annual growth target of 50%. And it said vehicle sales growth “may be notably lower” in 2024 than last year.

Moreover, reports say Tesla has cut Model Y production at its Shanghai gigafactory in response to dwindling demand and competition from low-priced Chinese EVs.

So, Tesla quietly dropping its aspiration for 20m vehicles by 2030 might have nothing to do with robo-taxis or mass-market models. It’s probably just a basic acknowledgment of reality. It’s unachievable.

What to do?

Tesla stock has never been cheap according to traditional valuation metrics, and that’s still the case today.

It’s trading at 63 times forward earnings. That easily makes it the most expensive of the ‘Magnificent 7’ group of tech stocksApple, Microsoft, Nvidia, Alphabet, Amazon, and Meta Platforms (née Facebook).

Therefore, I won’t be buying any more shares at this level, especially as China remains a wildcard. It’s a vast market with incredible growth potential, but there is regulatory risk and plenty of competition.

I’m still bullish on Tesla’s long-term future given its vast lead on Western carmakers when it comes to making and selling EVs profitably.

Plus, the company’s massive investments in AI means its self-driving software is now entirely AI-controlled. And because a self-driving car is basically a robot on wheels, advances in this technology should also lead to improvements in its Optimus humanoid robots.

The idea is for these bots to help build the EVs more quickly and one day be sold to other companies.

I’m not giving up on Tesla and will hold onto my shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in Alphabet and Tesla. The Motley Fool UK has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

2 mouthwatering FTSE growth stocks I’d buy and hold for 10 years

Growth stocks purchased today could be the gateway to many years of capital growth and returns. Here are two picks…

Read more »

Investing Articles

Can the IAG share price really be as dirt cheap as it looks?

While most shares have recovered since the Covid days, the IAG share price is staying stuck to rock bottom. Surely…

Read more »

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »