Tesla’s Stock Price Shows Doubts About Outlook Under Elon Musk

The Tesla shareholder vote over Elon Musk’s pay is in some ways a referendum on the performance of the company and its chief executive.

But even before the vote concludes on Thursday, Tesla’s stock price shows that investors have plenty of doubts about Mr. Musk and the electric carmaker’s outlook.

Tesla’s shares are down nearly 30 percent this year, even as the broader stock market is up 14 percent. At its peak in 2021, the stock market value of Tesla was $1.2 trillion, putting it in the company of tech giants like Microsoft, Apple and Google. Its worth has since plunged to around $576 billion, ranking it alongside less racy companies like Visa and Walmart.

Blame concerns about Tesla’s business.

The company is facing stiffer competition, and though its main models have sold extremely well, demand for them seems to be sagging. Price cuts aimed at stimulating interest are eating into profit margins. And analysts say there are no new models coming soon that could set off another buying wave.

“They’ve really struggled to grow,” said Toni Sacconaghi, a stock analyst at Bernstein who covers Tesla. “And part of the reason they’ve struggled to grow is they have no new models.”

Tesla’s profit in the first quarter fell 55 percent, to $1.1 billion, from a year earlier, while revenue fell 9 percent, to $21.3 billion. The company disclosed plans to lay off 10 percent of the work force, or 14,000 people.

Investors may also be shunning Tesla’s stock because they think it is overvalued. Its price is about 50 times the earnings per share that analysts expect Tesla to generate next year. The wider stock market trades at a much lower multiple — 20 times.

But some analysts still recommend buying the stock, because they expect Tesla’s growth to return when it eventually releases a lower-cost electric vehicle. “They still have significant volume growth ahead of them,” said Garrett Nelson, who covers Tesla for CFRA.

Mr. Nelson said he also expected Tesla to earn more from selling software that was designed to help Tesla owners drive their cars. And some on Wall Street hope that Tesla will one day deliver on its plan to build a huge fleet of self-driving taxis. Ark Invest, an investment firm led by Cathie Wood, a longtime Tesla fan, believes that the so-called robotaxis could lift Tesla’s shares to $2,600, nearly 15 times their current value.

Tesla’s current doldrums are quite different from the intense bullishness that sent its stock on a meteoric rally and enabled Mr. Musk to earn all the stock options in the award that is up for the vote.

Shareholders approved the pay package in 2018, but a Delaware judge voided it in January on the grounds that, among other things, Mr. Musk had effectively overseen his own compensation plan. Tesla hopes that if shareholders back the package again, the court will reinstate it. Some big investors say they will vote against the pay deal, currently worth about $45 billion, because it is too large.

The decline in Tesla’s shares points to a flaw in pay packages that rely on stock price performance: Executives typically don’t have to give back the pay if the stock falls back below the price at which they won it.

Tesla’s stock market value is now at a level that would have failed to qualify Mr. Musk for some of the package. But he gets to keep it because the market value hit the targets within the time stipulated in the package.

Mr. Musk’s actions may also have weighed on Tesla’s stock.

In 2021 and 2022, he sold around $38 billion of Tesla stock to help finance his purchase of Twitter, now called X. His stake in Tesla, once around 30 percent, is now 13 percent without the shares underlying the 2018 package, and 20 percent with it.

Mr. Musk has said he would like a 25 percent stake. “That’s not so much that I can control the company even if I go bonkers,” he said in January. “But it’s enough that I have a strong influence.”

Mr. Musk and Tesla’s press department did not respond to a request for comment.

A pressing question is whether Tesla’s stock might fall if Mr. Musk loses the vote on the pay package. Investors might sell if they believe he is crucial to the company’s future. But because so much of his wealth is in Tesla, Mr. Musk might see little reason to stray.

Mr. Sacconaghi asked him on an investor call in April whether he was thinking of lessening his involvement in Tesla. “I’ve got to make sure Tesla is very prosperous,” Mr. Musk said.