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Tesla (TSLA -1.32%) stock has dropped almost 50% in just the past three months, with the slide continuing today. Shares haven’t been this low since November 2020. Though the stock jumped more than 4% early Tuesday as the market in general opened higher, Tesla reversed course with shares down 5.6% as of 12:45 p.m. ET.
The stock has been on a downtrend since September as CEO Elon Musk got closer to taking over Twitter. That included share sales and has continued to concern Tesla investors as Musk has been preoccupied with running his new company. Investors have also been bothered by reports that Tesla may be experiencing a drop in demand for its electric cars produced at its Shanghai, China plant.
Image source: Tesla.
Fears around Chinese demand have been exacerbated by lockdowns and other measures to stem the spread of COVID-19. Tesla also lowered pricing for Chinese customers, which some said was done to stoke demand. Shares continued to drop today despite a report that insurance registrations for Tesla’s Models 3 and Y have been trending higher so far this month.
Insurance registrations are a good gauge of demand, but there have also been conflicting reports that Tesla plans to cut production in December after record November shipments from its Shanghai facility. Tesla’s China factory produced more than 100,000 vehicles in November, but Barron’s reported the company planned to cut Model Y production there by 20% this month.
But a report today showed insurance registrations for the Model Y and Model 3 rose about 10% from the first to the second week in December to almost 13,000 units. That positive sign doesn’t seem to be satisfying investors, though. But long-term thinkers should be getting interested in owning Tesla. With a price-to-earnings (P/E) ratio now below 50 based on results from the past 12 months, and plans to grow production at or near 50% annually, Tesla’s price/earnings-to-growth (PEG) ratio is now near 1. That could be the level that brings buyers back into the stock.
Howard Smith has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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