Stocks to sell

TSLA Sell Alert: 3 Reasons to Exit Tesla Stock Now

After a strong first half of 2023, Tesla (NASDAQ:TSLA) faced challenges with price cuts, reduced margins, and disappointing delivery growth, leading to a decline in stock value. This move has come amid what many contend will likely be a weak demand period for high-priced EVs, suggesting margin compression may be on the horizon.

Indeed, CEO Elon Musk has suggested that high interest rates contributed to Tesla’s challenges, emphasizing the need to make cars more affordable. However, competition and market-share losses likely played a more significant role in the substantial decline in Q3 profits.

Here are some other reasons why you should get rid of your TSLA stocks now if you still have them.

Issue with Swedish Workers

After about a month of strikes by Swedish postal workers and mechanics refusing to service Tesla cars, CEO Elon Musk responded, calling the situation “insane.” The strikes originated when a Tesla subsidiary in Sweden refused to recognize the labor union of about 130 striking mechanics.

The strike, initiated by Sweden’s IF Metall union seeking better wages, pensions, and insurance for Tesla workers, expanded to dockworkers and electricians, disrupting car deliveries and maintenance. Despite prolonged negotiations, Tesla refused to sign a collective bargaining agreement, challenging established labor market principles in Sweden, where most of the workforce is unionized.

Tesla’s unionization efforts in the U.S. faced challenges, with three unsuccessful attempts attributed to aggressive anti-union measures and limited labor protections. The National Labor Relations Board criticized Tesla and Musk for illegal actions, including employee interrogations and discriminatory actions against union supporters. In 2023, the company terminated over 30 union backers in Buffalo, New York, shortly after the unionization initiative began.

Musk, the wealthiest individual globally, faced scrutiny from labor agencies for anti-union stances, including a directive to delete a 2018 tweet implying stock options loss for unionizing Tesla workers. The strikes in Sweden could empower German Tesla employees, where unions push for a collective bargaining agreement amid claims of lower pay and dismissal of frequently ill workers. Over 1,000 workers at the Berlin factory joined a union protest in the past month.

Lawsuit Due to Autopilot Function on a Tesla Model 3

Another reason investors should throw the towel in for TSLA stock is because of its continuous issues and allegations on Tesla car models.

A Florida judge has ruled that a lawsuit against Tesla and its autopilot system, linked to a fatal 2019 crash, can proceed to trial. The judge found “reasonable evidence” suggesting Elon Musk and other executives were aware of the system’s defects but continued to promote and sell it. The crash occurred when a Tesla Model 3, with autopilot engaged, collided with a semi-truck, resulting in the death of Jeremy Banner.

The National Transportation Safety Board reported that, during the fatal crash involving a Tesla, the car was traveling at 69 mph with no attempt to brake or evade the truck crossing in front of it at 11 mph. Following the collision, the car coasted and stopped 1,680 feet away. Tesla did not respond to NPR’s request for comment. Elon Musk disbanded the company’s media and public relations department four years ago.

Court documents in the case, initially sealed, briefly appeared on the Palm Beach County Court’s website. Kim Banner, wife of the deceased, accused Tesla of gross negligence and intentional misconduct in a lawsuit. The judge, Reid Scott, noted the accident’s similarity to Tesla’s first autopilot-related death in 2016, involving a Model S colliding with a semi-truck. Tesla had attributed the incident to autopilot and the driver failing to detect the trailer’s white side against a bright sky.

Cathie Woods Sold Her Tesla Holdings

ARK Investment Management reportedly reduced its stake in Tesla by 15.79%, selling 764,970 shares in Q3 2023. The filings lack details on the reason behind the sale, leaving speculation about potential profit-taking by CEO Cathie Wood.

Speculation abounds regarding Cathie Wood’s TSLA stock sale—was it profit-taking or tax-loss harvesting? Regardless, Goldman Sachs analyst Mark Delaney projects Tesla’s Full Self-Driving (FSD) software could generate $1 billion to $3 billion in annual revenue, potentially reaching tens of billions by 2030. Monitoring FSD’s growth is crucial for investors.

Why Now May Be a Good Time to Trim TSLA Stock

Individuals may have ethical concerns or follow Cathie Wood’s example by selling Tesla shares, but making informed decisions about Tesla’s 2024 growth is crucial. While FSD software presents revenue potential, uncertainties about Tesla’s growth and low-growth trends advise caution. I still think this stock is too highly valued for its future growth and profitability forecasts.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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