How can Tesla stock be dropping this year as the S&P 500 soars — even with all its futuristic plans? Just look at how its profit is about to fall off a cliff.
Tesla's profit is expected to plunge more than 26% this calendar year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge.
This plunge puts Tesla among some unusually bad company. It's just one of 36 S&P 500 companies expected to post lower profit in 2024. S&P 500 companies at large are expected to report strong 9.7% earnings growth this year, says John Butters of FactSet.
And a weak profit outlook for 2024 is an anchor on the stock. Shares of Tesla are down roughly 4% this year, while the S&P 500 is up roughly 20%. The fear is that the company's big dreams aren't flowing to the bottom line.
"Investors and the bears are negatively piling on asking, 'Where are the details?'" said Wedbush's Dan Ives. "We totally agree that ideally (Elon) Musk and Tesla should have spent more time on details around this strategic autonomous vision and that will naturally weigh on shares ... as a knee-jerk reaction."
Tesla's Falling Profit Growth
S&P 500 investors don't have much patience for growth stocks that aren't growing. Tesla is just one example.
If the company's profit falls in 2024 as widely forecast, it would mark the second year in a row of lower profit. Earnings fell 23% in 2023, too. That's a huge letdown for investors used to massive growth from Tesla. Profit jumped 80% in 2022 and 201% in 2021. Before 2023, Tesla's earnings rose annually like clockwork since 2017.
Falling profit is a real problem for Tesla. The stock is in the S&P 500 Pure Growth index, but Tesla is not growing its profit. Additionally, it's trading for 67 times its earnings in the past four quarters. That's roughly three times higher than the S&P 500. Investors don't want to pay up for a stock with a mediocre 57 EPS Rating and 61 Composite Rating.
Tesla's Stock's Dilemma
So now Tesla is a richly valued stock in the growth indexes — that isn't growing.
Bulls hope all the big plans will soon flow to the bottom line. Analysts say the company will make $3.15 a share in 2025. If correct, it would be a return to form, representing annual growth of 41%.
But in the meantime, Tesla investors can only hope the stock can get itself back on track.
Biggest Expected 2024 Profit Drops In The S&P 500
| Company | Ticker | 2024 EPS change (est.) | Sector |
|---|---|---|---|
| Albemarle | ALB | -99.5% | Materials |
| Vertex Pharmaceuticals | VRTX | -98.9% | Health Care |
| Bristol Myers Squibb | BMY | -90.2% | Health Care |
| Take-Two Interactive Software | TTWO | -80.2% | Communication Services |
| Intel | INTC | -75.4% | Information Technology |
| Microchip Technology | MCHP | -66.3% | Information Technology |
| Southwest Airlines | LUV | -64.4% | Industrials |
| Healthpeak Properties | DOC | -61.9% | Real Estate |
| Marathon Petroleum | MPC | -60.9% | Energy |
| Incyte | INCY | -58.5% | Health Care |
| Tesla* | TSLA | -26.6% | Consumer Discretionary |
