Tesla and Boeing, once high-flyers, now face significant challenges, becoming the worst and second-worst performers in the S&P 500 year-to-date.
Tesla Inc. (NASDAQ: TSLA) and The Boeing Company (NYSE: BA), two major players in their respective industries, have experienced significant stock price declines this year, becoming the worst and second-worst performers in the S&P 500, respectively.
Safety Issues and Incidents Cause Boeing Stock to Crash
The Boeing Company (NYSE: BA) stock tumbled 4.29% in premarket trading on Wednesday, with shares trading at $184.24, down $8.25 from the previous close of $192.49 on Tuesday. The aerospace giant’s stock has been under pressure over the past year, with a 52-week range of $176.25 to $267.54.
Boeing’s market capitalization currently stands at $112.411 billion despite the company reporting trailing twelve-month earnings per share of -$3.67, resulting in an inapplicable price-to-earnings ratio. As the company prepares to release its earnings report between April 24 and April 29, 2024, analysts have set a one-year target estimate of $258.72 for the stock.
This year, the aerospace company has grappled with safety incidents and manufacturing issues, leading to increased regulatory scrutiny and reputational damage. In recent weeks, a 737 Max 8 ran off a Texas runway, while other flights experienced tire and engine issues, and controls jammed on another 737 Max 8 during landing.
These incidents have raised concerns about the safety and reliability of Boeing’s aircraft, prompting the Federal Aviation Administration (FAA) to conduct a six-week audit of the company’s 737 Max production. The audit revealed dozens of issues, with Boeing failing 33 of 89 product audits, indicating lapses in manufacturing processes and quality control.
As a result of these issues, Boeing is facing heightened scrutiny from the FAA and the Department of Justice (DOJ), leading to mandated production slowdowns and delays in certifying new designs.
Supply chain disruptions, such as the incidents involving the 787 Dreamliner, have affected deliveries and operations of airline customers like Southwest Airlines, causing them to rework guidance due to Boeing’s inability to meet original delivery schedules.
Arson in Germany and Poor Sales Makes Tesla Stock Dive
Tesla Inc. stock experienced a decline of 2.62% in premarket trading on Wednesday, with shares trading at $172.87, down $4.67 from the previous close of $177.77 on Tuesday. The electric vehicle maker’s stock has been volatile over the past year, with a 52-week range of $152.37 to $299.29 and a beta of 2.41, indicating high sensitivity to market fluctuations.
The company faced significant headwinds in the first quarter of 2024, including pricing pressure, falling delivery estimates, and increased competition in the EV market.
Tesla stock declined on Wednesday following General Motors’ decision to cut prices for its Chevy Blazer EV, contributing to the ongoing price war in the sector. Analysts have reduced their delivery estimates for Tesla to between 450,000 and 475,000 vehicles for the quarter, down from the initial 490,000 projection, due to weak sales in China and manufacturing challenges at its Fremont, California facility.
Tesla’s aging product lineup, with nearly all models launched before the COVID-19 pandemic, has raised concerns about its ability to maintain a competitive edge.
The company also faces supply chain disruptions caused by attacks in the Red Sea, a suspected arson at its Berlin factory, and downtime at its California plant. Despite these challenges, some analysts still consider Tesla’s valuation expensive, with a high price-to-earnings ratio amid declining gross profit and operating earnings, prompting Morgan Stanley to cut its price target on the stock.
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Originally Posted March 13, 2024 – Boeing Now the Second-Worst Performer in the S&P 500 YTD, Only Behind Tesla
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