(Bloomberg) -- Pole position in the electric-vehicle business and a high valuation means Tesla Inc. (NASDAQ: TSLA ) needs to deliver a blowout quarter to reclaim its trillion-dollar market value.
Tesla’s estimate-beating production and delivery stats have helped boost its projected revenue growth to 46% in 2022, a far cry compared to 20% for General Motors Co. (NYSE: GM ) and 15% for Ford Motor Co . (NYSE: F ). The problem is, even after the stock slumped 25% from its November record, Tesla’s dizzying market capitalization of $922 billion is more than 10 times the size of those 100-plus year old Detroit giants.
For Lindsey Bell, chief markets & money strategist at Ally Invest Securities, Tesla’s size only makes it more susceptible to violent market gyrations amid an environment of rising interest rates.
The broader meltdown in high-growth stocks, spurred by the Federal Reserve’s hawkish stance on monetary policy, adds to the headache for Tesla, which trades at 94 times forward earnings -- among the 10 most expensive members of the S&P 500 Index . What’s more, the specter of aggressive competition could hurt its pricing power as GM, Ford and new entrants such as Rivian Automotive Inc (NASDAQ: RIVN ) roll out more electric vehicles.
“If 2022 ends up being a year of more cautiousness toward some of the historical star performers, it is difficult to see why Tesla won’t get caught up in that,” David Jones, chief market strategist at Capital.com, said in an interview.
Even strong fourth-quarter numbers could go only so far in soothing investors’ nervousness about the stock, given its whopping 27,000% run since Tesla went public in 2010.
Wall Street analysts, in aggregate, see the stock going nowhere over the next year: The average price target tracked by Bloomberg is $953, an increase of 4% from Tuesday’s close.
For Wedbush’s Daniel Ives, who has a $1,400 target, the focus on Wednesday’s earnings will be around commentary on deliveries in 2022, the shortage of semiconductors, when production will begin at new factories in Austin, Texas, and Berlin, and the company’s growth and profitability outlook for this year and beyond.
“We believe the emerging fundamental story at Tesla will be back in focus of the Street with currently demand outstripping supply for Musk & Co. by roughly 30% globally based on our estimates,” he wrote in a note.
Tech Chart of the Day
After Peloton Interactive (NASDAQ: PTON ) Inc., Netflix Inc (NASDAQ: NFLX ). has now wiped out almost all of its pandemic gains, leaving shares at almost half the record high in November after its poor outlook last week. Shares of the pandemic-era trading favorites have gotten caught up in a widespread rotation out of growth stocks, as concerns over inflation and Federal Reserve tightening have made investors less tolerant of high-valuation names.
Top Tech Stories
- Microsoft (NASDAQ: MSFT ) shares rose in late trading after the software giant gave a forecast that reassured investors the company’s Azure cloud-computing business still has potential to drive growth
- SoftBank shares bounced from a 52-week low a day earlier as Nvidia (NASDAQ: NVDA ) considers walking away from its deal to buy Arm from the Japanese investment giant
- China’s Baidu (NASDAQ: BIDU ) and Zhejiang Geely Holding backed a nearly $400 million financing round for smart-car maker Jidu Auto, which Baidu spun off last year in a multibillion-dollar push into electric vehicles
- Activision Blizzard (NASDAQ: ATVI ), which is being bought by Microsoft, will release at least the next three games in its hit Call of Duty franchise on Sony’s PlayStation as well as its new owner’s Xbox
- Singapore attracted $8.8 billion in investment commitments last year, led by semiconductor manufacturers ramping up production to meet a global chip shortage and biotechnology firms chasing pandemic demand
©2022 Bloomberg L.P.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.