Tesla shares have plummeted. Should I buy in December 2022?

Tesla’s share price has reached the lowest levels compared to expected future earnings. Some analysts believe that Tesla shares will fall even more. Tesla shares ended trading at around $160 as of December 13, 2022. Shares have fallen 52% since the beginning of the year.

Popular electric car maker Tesla is under pressure from falling demand in China. Investors also fear that Elon Musk has begun to devote a lot of time to the social network Twitter, which he recently bought. Musk is actively involved in the management of the social network and began to devote less and less time to the development of Tesla.

The P/E multiple (the indicator reflects the current capitalization of the company, which is divided by the projected profit) fell to 30. For example, for the S&P 500 index, the average P/E is 17. This suggests that Tesla shares have room to go down. The lower the P/E ratio, the better for the investor.

Last week it became known that Tesla plans to cut production of the Model Y electric car at its Shanghai plant by 20% on a monthly basis, Bloomberg reported. Later, Tesla representatives denied this information, but the shares still fell by more than 6% after the news was published.

Chief Strategist Matt Maley of investment firm Miller Tabak + Co said his biggest concern was the slowdown in China. He also believes that Elon Musk has been spending too much time on the social network Twitter lately, which will restrain the growth of Tesla shares.

If the situation with sales of electric vehicles improves in China, this will positively affect the mood of investors. If Elon Musk spends little time on electric cars, and sales in China do not recover, then the shares could collapse to $150. At this price level, they will be of interest to investors, said Matt Maley.

Analyst Dan Ives of investment firm Wedbush believes that a prolonged decline in Tesla’s capitalization could lead to pressure from activist investors in 2023. Investors can demand from company representatives that they launch share buybacks, increase profits, and take “strategic steps” to grow the company.

Analyst Mark Newton from Fundstrat believes that if all the negative factors materialize, Tesla shares in 2023 could collapse to $109, which is more than 30% lower than the current level.