An Early Investor in Tesla Thinks It Will Drop by as Much as 50% This Year — Here’s Why
Written by
Marc Guberti
Edited by
Zuri Anderson
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Tesla stock has minted many millionaires. It’s up by more than 500% over the past five years, but the stock has endured a lot of sharp pullbacks on the way to its current levels. Many bears have been vocal about Tesla stock throughout its ascent, but the recent bear may catch people off guard.
Ross Gerber was an early investor who didn’t wait for the stock to rally before buying shares. He’s stuck with his position through the company’s many ups and downs, realizing a nice profit for himself. However, he’s become bearish due to recent events and market conditions which we will cover.
He reduced his stake in Tesla by 31% in 2024, and these four reasons may prompt him to further trim his position.
Full Self-Driving Cars Won’t Work
Elon Musk has defied expectations in numerous fields, but Gerber is more skeptical about his promise to deliver full self-driving cars. It’s a critical piece for Tesla’s robo-taxi segment, which can be lucrative if done well.
Gerber mentioned that Tesla doesn’t use lidar sensors that other self-driving cars use. Tesla relies on cameras for self-driving cars, and the early investor doesn’t believe that’s sufficient. If he is proven correct, Tesla would have to change the hardware of their vehicles while competitors like Waymo move further ahead.
Elon Musk Has a Lot of Projects Going On
Gerber also expressed concerns that Musk has a lot of projects and will have to divert time away from Tesla. He’s working on SpaceX, X, xAI, and DOGE. Business owners use systems so most of their time is spent making decisions instead of doing mundane tasks. Musk has done a great job at this, but each company still demands plenty of attention.
He has navigated the tightrope well for many years, but DOGE is a new initiative, and he has been posting a lot of X lately. It’s still hard to beat against Musk in the long run, and Gerber knows this, as well. While he did sell off a large percentage of his Tesla stake, the early investor still has plenty of his shares.
Tesla Sales Are Sliding
This is a real concern that has been taking shape for a few years. Automobile sales have been decelerating, especially in Europe and China. Those two markets face higher competition from other electric vehicles, and Musk’s political ventures have caused certain customers to avoid Tesla and get rid of their existing cars.
Declining vehicle sales and decelerating growth may become a long-term trend. Rising competition and the alienation of a chunk of Tesla’s consumer base can lead to bad financial results in the future. A successful pivot into Optimus robots can assuage these concerns, but tangible financial results from that part of Tesla’s business remain to be seen.
Tesla Is an Expensive Stock
Tesla trades at a lofty P/E ratio that’s well above 100, and that’s before accounting for year-over-year net income drops that have plagued the company over the last few quarters. It’s a high valuation compared to the tech sector, and it’s a substantial valuation compared to other automobile companies.
Some stocks can command high valuations by delivering high revenue and net income growth. However, Tesla’s growth has largely slowed down and doesn’t warrant such a high premium. A lot of that premium is based on Elon Musk leading the ship, but investors may start to get antsy if the company continues to lose market share in key markets. That scenario can cause the stock to plunge as investors reassess its valuation.
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