Confidence in Tesla stock remains thanks to energy storage company

There are several factors that explain the poor performance of the shares of this member of the Magnificent Seven in the tech sector.

Growing competition has forced the £535bn electric carmaker – led by Elon Musk – to slash prices globally, and the company’s second-quarter profits were disappointing as a result.

Chinese manufacturers such as BYD and Geely are challenging Tesla’s dominance, especially in China, the world’s largest electric vehicle market.

In Europe, BMW has overtaken Tesla in the EV sector. BMW may retain this advantage after the EU imposed a 9 percent tax on cars made in China, where 51 percent of Tesla’s output is produced.

How does Tesla compare?

These titans had their prices shaken up earlier this month. But the other members of the gang have been resurrected. Nvidia, the name behind the microchips that power generative AI, is up 169 percent since the beginning of January.

Tesla’s 2024 decline should be seen in context, however. Shares in the company, which Musk has led since 2008, are trading at $220, up 1,463 percent from 2019 levels.

When risky investment fund Scottish Mortgage started buying Tesla shares in 2013, the stock was trading at $11.

Shares peaked at $407 in November 2021.

How does Musk fight back?

Musk says autonomous “robotaxis” – promised to debut on October 10 – could turn Tesla into a $5 trillion company, though opinions on the promise vary.

Musk polarizes opinion. Some consider him the greatest commercial genius of our time, while others argue that he has become a threat to all his ventures, including Space X and Twitter, now known as X.

But everyone agrees that he is the driving force behind Tesla’s rise and that he must now address the problems.

As the recipient of a $56 billion (£44 billion) salary, it is the least he can do, although his job may be even harder if Donald Trump becomes president.

Musk supports Trump and could serve as an adviser, although a Cabinet position has been ruled out.

Are the shares worth buying?

Only seven of the 47 analysts covering the stock advise investors to sell. Another 20 analysts rate the stock as a ‘hold’, while 11 consider it a ‘buy’.

One reason for this confidence is Tesla’s energy storage business, which is seen as a key supplier of batteries essential to clean energy.

Tesla’s futuristic-looking $100,000 cybertruck may be making headlines, but batteries are likely to play a bigger role in the future.