Just over a month into 2024, Tesla (TSLA) has already lost roughly a quarter of its market cap, and the stock is one of the worst-performing S&P 500 Index ($SPX) constituents based on its YTD price action. The Elon Musk-run company continues to whipsaw, and has offered something for both the bulls and bears to work with over the last couple of years.

The shares lost two-thirds of their value in 2022, which brought a windfall for those who were short on the electric vehicle (EV) giant. However, as has been the case over the longer term, the more persistent short sellers eventually burned their fingers – and a lot of money – as Tesla stock more than doubled in 2023.

The stock has had a terrible start to 2024, and bears seem to sense an opportunity yet again in what they see as an “overvalued automaker.”

Why Is Tesla Stock Falling in 2024?

Not much has gone right for Tesla in 2024, ranging from the macro level to the company-specific level, and more importantly, from a leadership level. At the beginning of the year, Tesla reignited the EV price war – this time, through price cuts in China. The price cuts only exacerbated the selling in Chinese EV names like NIO (NIO), Xpeng Motors (XPEV), and Li Auto (LI).

Tesla’s Q4 earnings were also poorly received. While investors might have overlooked the slight miss on the bottom line, management's commentary on 2024 deliveries - which it said “may be notably lower than the growth rate achieved in 2023” - spooked investors.

I believe a part of Tesla’s rally was driven by the long-term delivery CAGR of 50% that Musk famously touted in early 2021. Now, 2024 could mark the third consecutive year when the company’s deliveries will arrive below - or rather, much below - that level.

With the Cybertruck still a long way from mass production, and the new low-cost model yet to be announced, Tesla lacks any real short-term growth drivers. The macro environment hasn't been favorable either, with the slowdown in China – Tesla’s biggest overseas market – seeming to worsen by the day. The sentiment toward EV stocks is already quite tepid, as the demand growth is not as strong as most believed it would be.

Elon Musk’s Controversies Take a Toll on TSLA Stock

Controversies over Musk haven’t helped matters, as the billionaire has threatened to build artificial intelligence (AI) products elsewhere, unless he has more control over Tesla. That goal faces a new roadblock after a Delaware court voided his gigantic $56 billion compensation plan.

While reports of Musk using drugs are not new, a Wall Street Journal report says that some Tesla board members also felt pressured to take drugs with Musk, fearing that not doing so would upset the mercurial CEO.

Tesla has never been a shining example of corporate governance, which was well exemplified when Delaware judge Kathaleen McCormick voided Musk’s compensation package, questioning the board’s independence as well as whether it even negotiated the fat pay package before its approval.

It isn’t the first time Tesla stock has fallen because of Musk’s actions, as a large part of the stock’s 2022 sell-off could be attributed to his antics surrounding his Twitter (now X) acquisition.

Tesla Stock Forecast: Analysts Get Apprehensive

A section of the market, which includes long-standing bulls like Cathie Wood, continues to be bullish on Tesla, and her ARK Invest believes that Tesla’s target market will rise multi-fold with the launch of the low-cost model. Then we have the bearish camp, which continues to dislike Tesla, even irrespective of any positive developments.

However, the recent events have made even some former bulls apprehensive about Tesla. Daiwa downgraded the shares from “outperform” to “neutral,” citing the lax corporate governance among other factors. Ross Gerber, a key Tesla shareholder, also believes that Musk's behavior is taking a toll on the stock.

Piper Sandler, which continues to be “overweight” on Tesla, lowered its target price by $70 to $225. Even Deepwater Asset Management’s Gene Munster, who is far from being a Tesla bear, also sounded cautious after the company’s disappointing 2024 outlook.

Tesla now has a consensus rating of “Hold” from analysts, which is a markdown from the average “Moderate Buy” rating a month back. The stock’s mean target price of $221.31 is almost 20% higher than yesterday’s close.

Can TSLA Stock Recover in 2024?

Tesla shares have gone through even worse turmoil previously, but have eventually recovered. That said, the company faces several uncertainties and unknowns in the near term, which makes the short-term outlook quite hazy.

That said, for those who believe in Musk and the Tesla story, the dip could be an opportunity to double down on those bets, as it still remains one of the most consequential companies of our times, with a presence in multiple exciting industries like electric cars, renewable energy, autonomous driving, robotics, and supercomputers.

For bears, perhaps no price would be a bargain for buying Tesla shares, as it has and might continue to trade at premium valuations when benchmarked against legacy automakers.