Weak deliveries could signal further declines

Shares of Tesla, Inc. NASDAQ:TSLA shares fell nearly 6% in premarket after the electric vehicle (EV) giant reported lower-than-expected delivery numbers for the first quarter. Tesla produced 433,000 vehicles but delivered only 387,000. Failure to deliver will continue to fuel speculation that Tesla will struggle to justify its premium valuation.

The company’s 387,000 deliveries were well below the FactSet consensus of 457,000. But they were also below the 484,507 vehicles the company delivered in the final three quarters of 2023 and the 422,875 deliveries made in the first quarter of 2023.

This is not a trend shareholders like to see. Especially as 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, up 0.2% year-on-year.

However, overall EV sales in China increased by nearly 33%. Not surprisingly, BYD was the sales leader in China, with over 300,000 vehicles sold. This was a 46% year-over-year increase.

The electric vehicle 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 sector is facing headwinds as supply far exceeds demand. There are many reasons for this. And while Tesla may be overvalued, it is the definition of the best house in a bad neighborhood.

The company not only supplies vehicles on a large scale, but is profitable in an industry where companies like Fisker Inc. New York Stock Exchange: FSR AND Canoo Inc. NASDAQ: GOEV face challenges trying to build an automotive company from scratch 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 and more consumers are returning to hybrid vehicles, which benefits companies like Toyota Motor Corp. NYSE:TM, whose stock has grown 32% in 2024 and 70% in the last 12 months.

Secondly, as time goes by, Tesla’s cars start to look dated compared to the new features offered. However, it remains to be seen whether many of these companies will be able to turn their visions into concrete deliveries.

Is Tesla entering a buy zone?

It may be tiring for some investors to hear, but Tesla does more than make electric vehicles. The company is a crucial part of the electric vehicle ecosystem and is one of the leading EV charging stocks. This highlights the reality that Tesla isn’t going away. But are the shares worth buying?

With this latest drop, TSLA stock is trying to hold support near its 52-week low. However, with the broad market sell-off and growing concerns about the company’s upcoming earnings report on April 17, the correction may not be over.

Add in the fact that short-term interest in the stock has increased more than 6% in the past month, and it’s possible that TSLA stock could drop near a 5-year low around $112 per share. If the stock were to plummet that low, it would trade at a discount of nearly 32% to its current price and about 80% off its 52-week high.

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