Shares of Tesla, Inc. (NASDAQ: TSLA) stock dropped nearly 6% in the pre-market after the electric vehicle (EV) giant reported lighter-than-expected delivery numbers for the first quarter. Tesla manufactured 433,000 vehicles but delivered only 387,000. The delivery miss will continue to fuel speculation that Tesla will be hard-pressed to justify its premium valuation.
The company's 387,000 deliveries were far below the FactSet consensus of 457,000. But they were also below the 484,507 vehicles the company delivered in the last three quarters of 2023 and the 422, 875 deliveries it made in the first quarter of 2023.
That's not a trend that shareholders like to see. Particularly since Tesla continues to lose market share in China. On April 1, 2024, data from the China Passenger Car Association showed that Tesla sold 89,064 cars in the country in March, a 0.2% year-over-year increase.
However, overall EV sales in China were up nearly 33%. Not surprisingly, BYD was the leader in China sales, with over 300,000 vehicles sold. That was a 46% YOY increase.
The EV Market Continues to Be Under Pressure
To be fair, many of the issues weighing on Tesla and the company's stock are not unique to Tesla. The industry is facing hurdles as supply far outpaces demand. There are many reasons for that. And while Tesla may be overvalued, it's the definition of the best house in a bad neighborhood.
The company is not only delivering vehicles at scale, but it's profitable in a sector where companies such as Fisker Inc. (NYSE: FSR) and Canoo Inc. (NASDAQ: GOEV) face difficulties in trying to build a car company from the ground up in a rising interest rate environment.
However, that doesn't change the fact that Tesla now faces competition not only in China but also domestically. For starters, more consumers are turning back to hybrid vehicles, which benefits companies like Toyota Motor Corp. (NYSE: TM), whose stock is up 32% in 2024 and 70% in the last 12 months.
Second, as time goes on, Tesla's cars are beginning to look dated compared to the new features being offered. However, it remains to be seen if many of these companies can turn their visions into actual deliveries.
Is Tesla Entering a Buy Zone?
It may be tiring for some investors to hear, but Tesla does do more than make EVs. The company is a crucial part of the EV ecosystem and is one of the leading EV charging stocks. That underscores the reality that Tesla isn't going away. But is the stock a buy?
With this latest drop, TSLA stock is trying to hold support near its 52-week low. However, with the broad market selloff and concerns rising over the company's upcoming earnings report on April 17, the correction may not be over.
Add in the fact that short interest in the stock is up more than 6% in the last month, and It's possible that TSLA stock could drop to near its 5-year low around $112 a share. If the stock were to plunge that low, it would be trading at nearly a 32% discount to its current price and approximately 80% lower than its 52-week high.
