Why It’s Time to Throw In the Towel on Tesla Stock

Stocks to sell

Tesla (NASDAQ:TSLA) stock keeps sliding even as the company has cut prices. The question is whether this is enough to spur the kind of growth many have expected from this name long-term.

Indeed, growth is stalled, as Tesla’s product lineup becomes increasingly stale and consumer trends shift. This former growth stock isn’t growing nearly as fast as many expected, meaning its valuation could continue to come into question.

At 48-times earnings (and earnings that could decline from here), this is a company with a multiple that doesn’t look attractive relative to other high-growth options in the market.

Here’s why I think Tesla remains a sell right now, and why the best move many long-term growth investors can make is to avoid TSLA stock at its current valuation.

TSLA Stock and Delayed Cybertrucks

Recent reports say that Tesla stopped its Cybertruck deliveries for the second time this year because of more issues. This time, issues were mostly due to a wiper motor problem, hence the delay on scheduled deliveries next week.

Some users reported Tesla disclosed a safety issue with the Cybertruck’s wiper motor, prompting delays and even returns. This followed Tesla’s previous pause on Cybertruck orders because of an accelerator pedal issue in April.

The $56 Billion Pay Package

Shareholders approved Musk’s pay package, but uncertainty remains if the court will uphold the re-vote amidst legal challenges.

Former Tesla supporter Steve Westly noted Musk’s visionary role but questioned his necessity in running all his companies simultaneously.

Musk’s leadership has seen successes like SpaceX’s achievements but also controversies such as Tesla’s financial struggles and regulatory issues following a privatization tweet.

Tesla faced near-bankruptcy, while not all SpaceX launches succeeded, each failure costing millions. Initially, the Neuralink chip had glitches but was later rectified.

Musk claimed Starlink broke even, yet reports suggested higher infrastructure costs. Mustafa Suleyman highlighted U.S. market tolerance for risks, contrasting with UK views. 

Everyone is Turning on Elon Musk

Elon Musk, once ardently supported by Tesla investor Ross Gerber, faced a shift in loyalty amid controversies and new ventures.

Initially endorsing Musk’s ambitious stock awards and urging discretion in public spats, Gerber now criticizes Musk’s recent behavior and diversions like X/Twitter and xAI.

As CEO of Gerber Kawasaki, he publicly opposes Tesla’s proposed $50 billion pay package restoration, marking a significant departure from his previous support.

Leo Koguan, formerly an ardent admirer of Elon Musk, has reversed his stance amid governance concerns.

Once Musk’s staunch supporter, Koguan, Tesla’s major retail shareholder, opposed reinstating Musk’s stock awards. Koguan also thinks Musk should give more priority in being a CEO to Tesla and fix its governance structure.

Musk then defended his commitment to Tesla and put emphasis on the issue during its recent earnings call. Known to be the head of SpaceX and Neuralink, many would say Musk’s attention is divided.

Such problem led to institutional investors like Norway’s sovereign wealth fund voted out for Musk’s $56 billion pay package. 

TSLA Stock is Going Down

So far Tesla is not performing well in 2024. The stock has now seen a more than 30% decline around its 50-day moving average. The market is expecting earnings to drop down to $2.41 in 2024, which is a 23% decrease from last year’s $3.12.

Elon Musk has consistently added some controversies that affected Tesla figuratively. Although the company is the first to introduce EVs, Tesla might be losing its shine soon.

Despite the surge in years 2019 to 2021, this is the a great time to sell TSLA due to Musk’s controversies and low sales growth worldwide.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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