Why Tesla stock has been on a wild, wild ride

If you’re looking for a screwball company that has a screwball chief executive officer and a screwball stock price, I can tell you just where to go: Tesla, Inc.

The screwball CEO, of course, is Elon Musk, who three years ago also crowned himself Tesla’s (TSLA) techno-king, whatever that title is supposed to mean.

Tesla itself is a screwball auto company that has also engaged in a variety of unusual non-automotive activities, such as selling solar power to residences after shelling out $2.5 billion of stock in 2016 to buy SolarCity, a company founded by two of Musk’s cousins.

And when it comes to its stock price, Tesla is Screwball Central. If you buy its shares, the only thing you know is that you’re likely to get a wild ride. However, you can’t predict in which direction. Depending on what year you happen to look at, Tesla is either one of the market’s biggest winners, or biggest losers.

So if you’re new to Tesla, or just want to buy more of its shares, here are some numbers to consider.

Last year, Tesla was among the biggest gainers in market value of all US companies, according to numbers that Wilshire Indexes assembled at my request. Tesla’s 2023 gain of $366 billion in stock market value was the seventh largest among US corporations.

That’s how Tesla became part of the Magnificent Seven, a term created by Michael Hartnett, a Bank of America analyst. The Seven, which also includes Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG, GOOGL), and Meta (META), accounted for more than 60% of the return posted by the S&P 500 (^GSPC) last year, even though they started the year with a combined S&P weight of only about 20%.

But in less than four weeks this year, Tesla has given back more than half its 2023 gain. Its stock performance has switched from magnificent to maleficent.

That’s primarily because of less-than-stellar financial numbers that Tesla reported in January, combined with increased competition for electric vehicles in important markets like the US and China. Not to mention some games being played by Musk, which we’ll discuss in a bit.

As of Jan. 25, Tesla was by far the biggest dollar loser so far this year, with its stock market value falling by $207.4 billion, according to Wilshire. That’s more than six times the decline posted by the No. 2 loser, Boeing, whose value has fallen by $33.3 billion — thanks largely to the door panel that blew off one of its planes during a flight earlier this month.

It’s also 7.5 times the $27.6 billion decline of the third-biggest loser, Intel, and almost 10 times the $21.6 billion decline of the fourth-biggest loser, UnitedHealth Group. The ups and downs of Tesla’s stock market value are enough to make your head spin.

I’m using stock market value numbers rather than percentage change numbers because the market values show you how much shareholders (and investors in index funds that include Tesla stock) have made or lost in a given period.

I discussed Tesla’s huge 2022 loss numbers with you last January. But Tesla’s huge market gain last year and its huge loss so far this year make it time for us to revisit the issue.

To understand what is going on with Tesla’s stock price, we have to combine Tesla’s operational and competitive challenges and successes with various games being played by Musk, who — among other things — has threatened to move some artificial intelligence operations away from Tesla to other parts of his business empire unless the Tesla board gives him billions of dollars of additional Tesla shares.

As you may know, Musk sold tens of billions of dollars of Tesla stock last year to raise the funds he needed to buy a majority stake in X, then Twitter, and to pay the income tax due on his profits from those sales. Now, Musk wants Tesla’s board to bulk up his holdings again. (It will be interesting to see what impact, if any, Tuesday's ruling by a Delaware judge voiding Musk's 2018 stock option package will have on his current dealings with Tesla's directors.)

Twitter has been a financial fiasco for Musk and his co-investors. Fidelity Investments, for instance, has marked down the value of the X stake held in some of its mutual funds by 68% as of the most recent available report.

Ouch!

None of this, including the X shenanigans, can be helping Tesla’s stock price.

Over the long term, for sure, Tesla has been a big winner for investors. Even with its sharp recent decline, it’s still worth 7.5 times as much as it was at the end of 2019.

It's been, however, a big loser in recent years. It’s worth a bit less now than it was at year-end 2020. But the big slide has taken place since the end of 2021. From then through Jan. 25, Tesla’s stock market value was down more than half a trillion dollars, or 47%. During that same period, the S&P 500 index, which had plenty of ups and downs of its own, rose by about 3%.

It’s possible that Tesla will turn around as it did last year, and its value will start soaring again. But buying Tesla stock and expecting a smooth ride is like putting a Tesla on full autonomous drive and hoping that all goes well.

Sure, you may end up with a great ride. But you can also end up in a ditch.

Allan Sloan, who has written about business for more than 50 years, is a seven-time winner of the Gerald Loeb Award, business journalism’s highest honor. He’s won Loebs in four different categories over four different decades.

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