Tesla Inc. ended its roller-coaster year with its first monthly decline since May as investors digest Chief Executive Officer Elon Musk’s massive share sale, a recall affecting hundreds of thousands of electric vehicles and a shortage of some key parts.
The stock’s 7.7% slide in December is hardly a disaster for Tesla, whose 50% annual gain makes it one of the handful of companies in the world with a market value above $1 trillion.
The shares pulled back from November’s record high as Musk unloaded some of his stake, after conducting a Twitter poll on the idea and then saying he would sell 10% of his holdings.
The stock, which closed at $1,056.78 a share Friday, fell more than 21% this month through Dec. 20, briefly sending the company back below the $1 trillion mark.
Musk said in a Dec. 22 tweet his sales were “almost done,” with the stock stringing together its strongest four-day run since March.
“The Musk stock sales and lingering chip shortage have caused some investors to hit the sell button after another great year for the stock,” Wedbush analyst Dan Ives wrote in a message.
The risk-off environment has encouraged some investors to cut their exposure, he said.
Representatives for the Austin, Texas-based company didn’t immediately respond to an emailed request for comment.
Tesla lost some ground this week when it recalled 475,000 cars in the U.S. — nearly equivalent to its global deliveries last year — because of safety defects.
Global Equities Research analyst Trip Chowdhry said the recall is a “non-event.” Reuters reported a similar action in China covering 200,000 vehicles.
Tesla’s workers, meanwhile, are in the final hours of a push to complete record quarterly deliveries. It’s a data point investors will be closely watching in early January.
Analysts are divided about the stock’s future, with 22 buy ratings, 14 sell ratings and 12 in between at hold. The average price target of $863 is about 18% below Friday’s closing price.
Ives, who has an outperform rating on the stock and a $1,400 price target, sees 2022 as a “major inflection year” as demand for electric vehicles grows. He said the stock could rise about 30% next year.
Morningstar analyst Seth Goldstein, who has a sell rating and a $680 price target, said the market has taken the CEO’s stock sales as a sign that Tesla is overvalued, and some investors may be taking profits after what’s been a “great year.”
Goldstein is forecasting lower vehicle deliveries than the current share price implies.
“Tesla will be opening two new factories, which will have startup costs and higher initial operating costs, which will likely weigh on profitability,” he said via email.
“However, consumer demand for their vehicles remains strong, so it will be interesting to see how investors weigh vehicle growth versus potential near-term decreases in profit margins.”