What does the stock weigh?

Shares of Tesla fell as much as 8% on Friday morning. Since then, they have recovered to less than 4% as markets showed a dramatic recovery late on Friday, but the stock still lost more than 15% of its value a year and ended below $ 600 for the first time since December 4th. .

Here are some of the biggest factors weighing the cult stock and knocking down the richest crown in Elon Musk’s head – the CEO owns about 22% of Tesla shares.

On Thursday, Fed Chairman Jerome Powell said that “upward pressure on prices” and “transient inflation increases” could come to the United States as the economy reopens after a year of Covid restrictions affecting companies on all sides.

The market is now worried that interest rates will rise and the feds will not take aggressive political action and will not even be able to control it. Bond yields are rising.

This leads to a broader correction in technology stocks, which are valued on the assumption of a strong increase in future cash flows. As inflation increases, the value of these future cash flows decreases. As previously reported by CNBC, the Nasdaq 100 list of the 100 largest non-financial stocks on the stock exchange fell by about 8% from the all-time highs reached three weeks ago.

This affects most technology giants. For example, Apple has dropped from about $ 129 to $ 121 so far, and Netflix has dropped from about $ 523 to $ 516. But Tesla’s decline is more precipitous so far.

Some of Tesla’s biggest and strongest supporters have cashed in on some of their shares and have begun to recognize the onslaught of electric vehicle competition as a real challenge for Tesla in the end.

For example, Ron Baron has sold 1.7 million Tesla shares and invested in two of the company’s biggest potential rivals, GM-owned Cruise and Amazon-backed Rivian, while paradoxically saying he expects the shares Tesla will eventually rise to $ 2,000.

Former Tesla board member Steve Westly told CNBC’s Power Lunch this week that while he remains a climber, “Tesla will not be the king of the hill in electricity forever.” He added: “They get competition from all sectors. They will have to double down to compete.”

Indeed, automakers, including Ford and Volkswagen, have had early success with sales of electric vehicles, including Mach E and ID.3, compared to Tesla models in the US and Europe.

Meanwhile, future EVs, including the all-electric version of the Ford F-150, Lucid Air, Rivian’s SUVs and electric trucks, and others are causing excitement. Just yesterday, Porsche unveiled the production version of Taycan Cross Turismo and said it will start sales in the US this summer. It’s a $ 90,000 EV car, a more affordable and practical approach to Porsche’s high-performance EV model, Taycan.

The lack of semiconductors has caused most car manufacturers to temporarily close some lines at their factories, and Tesla is no exception.

Tesla CEO Elon Musk acknowledged that the company’s plant in Fremont, California, was temporarily closed due to a “shortage of parts” in a tweet on February 25th. He said it was closed for only two days, but did not say whether partial stops on some lines would continue.

Tesla previously warned in sending and depositing earnings in the fourth quarter of 2020 that the lack of chips could hinder their vehicle production targets in the first half of 2021.

Chief Financial Officer Zachary Kirkhorn said in an appeal to investors that for the first quarter of 2021:

“[Model] S and X production will be reduced due to the transition to recently redesigned products. In addition, we are working hard to address the overall shortage of semiconductors, as well as the capacity of ports, which can have a temporary impact. “

If Tesla does not produce a large volume of vehicles, due to the shortage of parts or the delay in the delivery of parts from abroad to its US factories, the company would not generate as many regulatory credits as it wants. Tesla sells these environmental loans to other automakers, as it has historically achieved profitability.

Cost control has been on the mind of CEO Elon Musk for years.

In December 2020, he wrote by e-mail to all Tesla employees: “Investors give us a lot of credit for future profitability, but if, at some point, they come to the conclusion that it won’t happen, our stock will be immediately crushed like a breath under a sledgehammer! “

But at the same time, Tesla is in a tear of expansion that will cost it dearly. The electric vehicle manufacturer is building factories in Austin, Texas, in Brandenburg, Germany and is expanding its footprint in China. He also undertook to renovate aspects of its Fremont facilities, including the paint shop, the area of ​​the factory where his cars are painted.

Musk also has ambitions for Tesla to exploit its own lithium internally. And to increase production of Tesla batteries at a pilot plant also in Fremont.

In addition to these efforts, the company is in the midst of costly recalls and may face several – whether voluntary or mandatory. The most significant of these voluntary recalls, in China and the US, Tesla recalls Model S and X vehicles that face touch screen display failures.

–Jessica Bursztynsky contributed to this report.

Correction: Tesla was down 3.78% on Friday.