Tesla is one of the most important companies in the world, and everyone from regular people to wealthy investors has an opinion (and maybe even a few shares) of the company. Over the years that Tesla has been around, there have been a lot of good and bad changes and rumors about it. Because of this, public opinion about the company isn’t very stable, and as a result, the stock price has been all over the place over the years. Today, we’re going to look at why Tesla stock dropped so much and where it stands now. Let’s get started.
Reaching great heights
Before we talk about how Tesla’s stock price got to where it is now, it’s important to know how it got there in the first place. For most of its history, Tesla traded almost horizontally, which means that its price changes were small and it was very stable. In 2017, when Tesla went public for the first time, each share was worth about $20. This pretty much stayed the same until the end of 2020, when things started to get really interesting.
There are several factors contributing to Tesla’s rapid growth through 2020. First, there are the prices. Tesla had a big day on January 10 when it was given a value of $86 billion, which was a record for US cars. In June, just a few months later, Tesla was worth around $180 billion on the market. At the same time that these estimates were being made, Tesla was putting out cars in large numbers for the first time.
Before this, there had been deliveries, but now the company was really beginning to grow. Delivery of the Model Y started in March 2020, and the first car with a range of 400 miles was revealed. Because of this flood of buyers, Tesla was able to do better than the over $40 billion in shorts, which are stock market bets against the company. A “short squeeze” is what happened when these shorts ran out. The stock went up even more. Going into 2021, it looked like Tesla would have a great year. By June, the first Model S plaid gig cars had been delivered, hundreds of thousands of Model 3s had been delivered, and the company was opening gig plants left and right.
Once October came around and people started spending more money again after the pandemic, Tesla’s stock really started to grow. On October 25, Tesla was worth $1 trillion, and a share of its stock cost more than $350. The company moved its offices to Texas in December, but it kept sending out tens of thousands of cars every quarter. But this was the highest point Tesla would reach before it started to fall. Before November and December, Tesla’s share price had hit an all-time high (ATH) of more than $400. From here, things got worse.
Why did Tesla’s stock start dropping after November 2021?
Doesn’t everything that goes up have to come down? Well, as 2022 began, Tesla’s stock price began to drop for the first time in a real way. Again, there isn’t a single reason why the price went down. Instead, it was a combination of outside events, problems within the company, and bad press.
World events are probably the most important reason why Tesla’s price has been going down generally. The first big drop for Tesla and most other companies began at the start of 2022. In 2020, there was a war between Russia and Ukraine, interest rates went up, demand went down because a recession was coming, and there were problems with the supply chain. Each of these has had a big effect, not just on Tesla but on the market as a whole.
Here’s the evidence
After Microsoft (MSFT), Apple (AAPL), Meta Platforms (META), Amazon.com (AMZN), and Nvidia (NVDA), Tesla’s losses have made it the sixth-biggest drag on the performance of all three this year. After Apple, Microsoft, Alphabet (GOOG), and Amazon, it is the fifth-largest company by market capitalization.
On top of problems all over the world, worries about the (famous) CEO of the company kept growing. Musk has always been a bit of a lightning rod, but what happened on Twitter recently seemed to make investors even less confident in his ability to steer Tesla, which is worth $650 billion. Musk said he wanted to buy Twitter in the second half of the year. The deal is now official, but not without a lot of noise from both sides. For many investors, Musk already had a lot on his plate with SpaceX, Tesla, Neuralink, and The Boring Company. Adding Twitter to that list could be the company that breaks the CEO’s back.
A New Hope for Tesla
Even though Tesla and its stock price have caused a lot of fear, there is something important that needs to be said: the numbers for Tesla this year have been very good and stable. Even though there has been a lot of worry about “Russia this” and “bear market that,” the company’s sales and deliveries have been quite good. In fact, Tesla beat EPS (earnings per share) and revenue estimates for almost every quarter this year, with Q3 just a few days ago being the only quarter where sales fell short of expectations.
On top of doing well in spite of the fear around the world, Tesla has kept doing what they have to do: providing cars. In the third quarter of 2022 alone, more than 343,000 cars were sold and 365,000 were made.
The present stock price shows that there are some worries about the company, but it’s clear that things aren’t going to slow down any time soon. Even though Tesla’s share price went down a lot in 2022, it looks like they will still make more electric cars, batteries, and whatever else Musk comes up with than anyone else in the world.