Electric vehicle maker Tesla (TSLA) has been on top of the game for a while now. With 2021 departing—and none too soon for some—already some are looking forward to 2022 and what may emerge therein. For Tesla, it will be starting the year off as still the undisputed leader in electric vehicles.
However, with a growing competition base and regulators eyeing the company, Tesla's leadership may not be so undisputed much longer. I remain bearish on Tesla because its odds of decline right now are a lot better than its odds of further gain. (See Analysts’ Top Stocks on TipRanks)
Looking at Tesla share prices reveals a stock performing like many companies' would. Tesla led off the year with a bit of a run-up. That run-up garnered the company a boost of roughly 25% in its share price. It held that level for most of a month before a pronounced slide.
That slide brought the company down under its opening price for the year and represented its low for the year. Then, the share price recovered and moderated until reaching a plateau around $600 in mid-May.
The plateau then tilted slightly upward, and Tesla began slowly but surely gaining until it hit $800 a share in mid-October. Subsequently, Tesla stock blew the doors off the market and gained nearly 50% in the space of about three weeks. The surge didn't last, though, as the stock started one final leg down to close under $900 for the first time since October. It has bounced since then, and is over $1000 currently.
Now, analysis has begun to emerge about Tesla's 2022, and the news is not so welcome. We've already seen this year how a range of competitors is lining up to take a bite out of Tesla's lunch, if not take the whole thing. Yet, that's not the only trouble facing Tesla in 2022. Reports suggest regulators are poised to take a closer look at Tesla, and that may mean plenty more troubles to follow.
Further reports indicate Tesla may be coming to the end of its rope. The company has continued to make gains in production and shipping, but the low-hanging fruit is running out.
Tesla brought out 624,582 vehicles for the first three quarters and is eyeing a full-year forecast of 900,000. That's nearly double what they brought out in 2020, and some wonder if the company can keep up that breakneck pace.
A Whole Different MarketIt may be that Tesla's glory days are behind it. With Elon Musk seen frantically selling off stock ahead of his upcoming tax bill, perhaps even he sees the writing on the wall.
Back when Tesla first got started, it was one of a handful of firms in its market. It didn't take much time—just a couple of years—for everyone from legacy automakers to Chinese firms to see that same writing and jump in. Now, there is a panoply of electric vehicle options out there. The picture will only get more crowded and worse for Tesla.
Throw in the fact that regulators have been increasingly looking Tesla's way, and that could mean trouble. From the various fines and fees that might be involved to potential capital outlays as some part is brought up "to code," all manner of possibilities, mostly bad, emerge. Increased regulatory scrutiny seldom ends with the company having more money than before the scrutiny started.
Worse, Tesla's ability to expand is limited. There are no signs that the company has new cars in the pipeline, and those that were new weren't exactly great, to begin with. Remember the introduction of the Cybertruck? If Tesla were pinning its future on the Cybertruck, it would probably be a good idea to get out now.
Tesla has stepped into virtually every geographical market as well, while its competitors are just getting started. Tesla has made great strides in securing a market base, but any problem therein will encourage that hard-won base to go elsewhere. Soon, those disgruntled former base members will have plenty of options of other places to go, too.
Wall Street's TakeTurning to Wall Street, Tesla has a Moderate Buy consensus rating. That's based on 13 Buys, eight Holds, and six Sells assigned in the past three months. The average Tesla price target of $985.64 implies 1.3% downside potential.
Analyst price targets range from a low of $215 per share to a high of $1,580 per share.
Concluding ViewsIt's probably not a good time to invest in Tesla right now, in my view. Tesla is just off its highs, both for the year and in absolute terms. A growing body of competitors is waiting in the wings, and some are even making sales right now. Between that and increased regulatory scrutiny, the market will be set against Tesla at virtually every turn.
Barring some minor miracle, Tesla is in trouble. Possibly, the company has several new models it can bring out. Maybe, the company is inches from completing an auto-drive system that actually works. Without something serious to bring to bear, Tesla's ability to compete declines with every new competitor. This is why I'm bearish on Tesla stock. At least, until Elon manages to bring out something new to stave off the competition.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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