Why Is Tesla Stock So Cheap?

Andrew Willis: In the fourth quarter, Tesla TSLA produced around 30,000 more vehicles than it delivered. Are we dealing with slowing demand for their EVs? Was it the events of Elon [Musk] and Twitter that did it? Or do we need to go further back?

Stock strategist Seth Goldstein points out that fourth-quarter deliveries for the EV company still came in 31% higher on a year-over-year basis, suggesting that demand continues. But consumers aren’t always on the same timeline as investors. The market is currently pricing the stock near our downside scenario of our fair value estimates, where among other poor outcomes, we assume that competition takes a bite out of deliveries and cost reductions don’t materialize at Tesla. Meanwhile, consumers can still love the car itself and be willing to pay a premium for it as prices drop.

For Morningstar, I’m Andrew Willis.