The market capitalization of electric car maker Tesla, ($TSLA), which accelerated to $1 trillion in October, fell below $980.15 Billion. Since November the stock fell almost 25% especially this month the stock fell 15% and is continuously falling every trading session. Even ARKK ETF fell 20% from November to December.
Why is the stock falling?
1. High Valuation
Many analysts believe that the stock's valuation is inflated. Even with the recent slump in their price, the company's shares have a trailing price-to-earnings (P/E) ratio of 307.86. Peers like the General Motors Company (GM) and Ford Motor Company (F) have P/E ratios of 7.64 and 27.44, respectively, even though they sell more cars.
2, Stock Selling
CEO and Founder Elon Musk has been selling his shares, most recent sale was on Monday, Dec. 13, when he sold 934,091 shares for roughly $906.5 million.2 He has sold $2.87 billion worth of stock so far in December after selling $9.85 billion worth of stock in November. He currently has 19.5% of the company's shares.
3. Competitor
Tesla is not alone in the EV market, Rivian is also competing for the market share currently their market cap is $100 Billion but it hasn't sold any car even Lucid which another EV maker hasn't sold any car and their valuation is $60 Billion. These stories sound very similar to Nikola which scammed the Wallstreet by posing as an electric truck manufacturer but in real life, they didn't even have a working prototype. Right now everyone is betting on the EV race lets see which company dominates at the end.
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