Tesla stock is down 60%. how much lower can it go?

Nikola Tesla (1856-1943), Serbian inventor and engineer (NASDAQ: TSLA)The company's growth story is starting to look shaky. After years of escalating deliveries of its popular electric vehicles (EVs), the company is running headlong into economic reality. Demand for EVs is weakening to the point where traditional automakers are pulling back on their ambitious plans. In China, cheaper alternatives are eating into Tesla's lunch.

Tough times for Tesla

Tesla's quarterly deliveries declined in the first quarter of 2024, the first decline since the outbreak. The company delivered 386,810 vehicles, down 201 TP3T from the fourth quarter of 2023 and 91 TP3T from the first quarter of 2023.Meanwhile, Tesla produced nearly 50,000 more vehicles than it delivered.

Tesla has also recently taken steps to boost revenue. The company now requires employees to demonstrate the company's Supervised system when delivering cars, but this does not make the cars fully autonomous. The system is an expensive add-on that Tesla vehicles do not include by default.

Tesla also recently reduced the monthly price of its Fully Self-Driving System (FSD) from $199 to $99, which is likely an indication that the system is being used less than the company expects. If Tesla is able to significantly increase the number of subscribers, the price cut could help boost recurring revenue.

The company is also cutting costs. Tesla is reportedly planning to lay off more than 10%, or at least 14,000 employees worldwide.

Given Tesla's struggles, it's no surprise that its stock price has plummeted about 60% since its peak during the pandemic.

Crash may not be over yet

How much lower can Tesla's stock price go? No one can answer this question definitively, but we can look at Tesla's valuation relative to other automakers.

Even after the stock price crash, Tesla is still valued at $525 billion. MeanwhileGeneral Motors (car company)The company is valued at US$50 billion.Ford (name)at US$49 billion.ToyotaThe value of Tesla is $332 billion. Tesla is still worth more than all three companies combined. Tesla delivered 1.81 million cars in 2023, while Toyota sold more than 10 million.

A common argument in defense of Tesla's sky-high valuation is that the company does other things besides make cars. That's certainly true, but the argument doesn't seem as strong as it once did.

Software was supposed to be the main growth driver for Tesla, but demand doesn't seem to be particularly strong given the significant price cuts in FSDs. Tesla sells solar panels, but demand is falling across the industry due to high interest rates, declining demand, and changes in California's net metering. One analyst predicts that residential solar sales will decline this year by 13%. Tesla's battery storage business may also be affected, as solar power and battery storage are often complementary.

By the end of 2023, Tesla will have approximately $29 billion in cash and short-term investments. These cash reserves give Tesla plenty of breathing room, but not enough to avoid massive layoffs. If there's any company that can burn through cash at an alarming rate during a downturn, it's an automaker.

The story that drove Tesla's stock price to incredible heights isn't as compelling as it was a few years ago. Tesla's valuation is still at eye-popping levels, and the stock looks extremely risky.

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Timothy Green has no position in any of the stocks mentioned above.The Motley Fool holds a recommendation on Tesla.The Motley Fool recommends General Motors, and recommends the following options:General Motors January 2025 $25 Call Options Long.The Motley Fool has a disclosure policy.The Motley Fool has a disclosure policy.

Tesla Stock Drops 60%. How Much Further Can It Fall? This post was originally published by The Motley Fool.