2 reasons why Tesla stock fell on Thursday

Tesla (NASDAQ:TSLA) stock fell 2.3% on Thursday, extending its year-to-date drop to 29.3%. This way, Tesla stock is one of the worst S&P 500 performers in 2024.

According to Citi equity analysts, the TSLA stock weakness on Thursday is attributed primarily to two key factors. 

Firstly, the launch of Xiaomi (OTC:XIACF)'s SU7 vehicle and its competitive pricing range has stirred concerns about intensifying competition in the already crowded China New Energy Vehicle (NEV) market. 

This is seen as a potential threat to Tesla's market position in the region. 

Xiaomi launched its first electric vehicle (EV), the SU7, on March 28. The event unveiled the addition of an SU7 Pro edition, not previously announced during the soft launch, bringing more variety to Xiaomi's automotive lineup. 

The SU7 series is priced competitively, with the base model starting at Rmb215.9k, the SU7 Pro at Rmb245.9k, and the SU7 Max at Rmb299.9k, aligning with the initial price range expectation of Rmb200-300k.

“We currently forecast EV shipment of 60k/131k/252k units for 2024/25/26E,” Citi analysts said.

Secondly, ongoing worries about Tesla's first-quarter deliveries continue to weigh on investor sentiment, adding to the bearish outlook for the day. Several Wall Street analysts cut their deliveries estimates in recent days, which is further weighing on stock as consensus continues to come down.

Deutsche Bank analysts cut the price target on Tesla stock this week.

“We continue to see pressure on margins and earnings, as the company already announced deep price cuts in both China and Europe earlier in the quarter, and made further moderate price adjustments in February to incentivize vehicle purchases,” Deutsche Bank analysts wrote. 

“Although Tesla has announced it will raise prices in the U.S. and China effective April, we view it as an attempt to boost sales in March, rather than a sign of solid demand."

Despite the immediate negative impact on Tesla shares, Citi analysts view the situation as a broader indicator of the undervalued potential within the traditional automotive sector.

“Looking beyond Tesla, events such as this reinforce our long-held positive view around the overlooked value of GM’s and Ford’s respective NA Truck/Commercial franchises–end markets showcasing both strong growth&defensive qualities,” Citi analysts added.