We recently compiled a list of the 10 Worst Performing Blue Chip Stocks in 2024.In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against the other worst performing blue chip stocks in 2024.
Strong Market Performance Amid Uncertainty
The third quarter ended with a bang, with all the major indices near record highs as investors shunned macroeconomic instability, soaring geopolitical tensions and U.S. election uncertainty. Strong gains in the quarter were fuelled by expectations of lower interest rates heading into year-end and growing expectations of a soft landing of the U.S. economy.
Artificial intelligence has been a big success story that has helped push the equity markets to record highs. Against the overall trend, the current bull market had a better second year, up 33% compared to the historical average of 13%, and a better first year, up 22% compared to the historical average of 44%, according to BofA. It’s also important to remember that even bull markets’ third years of growth can be rocky.
While the S&P 500 has gained over 60% since the 2022 lows, researchers at BofA note that there could be a significant pullback in the near future.
“Historical studies suggest that the third year of a typical bull market tends to be unremarkable as a mild bout of de-rating overshadows humdrum earnings growth,” BofA equity strategist Ritesh Samadhiya said in a note to clients.
Economic Concerns and Investment Opportunities
While voicing concern that the economy is running at a hotter-than-desired pace, Federal Reserve Governor Christopher Waller hinted that future interest rate cuts would be less drastic than the significant move in September. According to policymakers, recent employment, inflation, GDP, and income reports indicate that the economy might not slow down.
“While we do not want to overreact to this data or look through it, I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting,” Waller said in prepared remarks for a conference at Stanford University.
The sentiments come as investors remain cautious about the long-term outlook amid soaring geopolitical tensions and economic uncertainties. The growing uncertainties have been one of the catalysts behind some of the worst-performing blue chip stocks in 2024.
Nevertheless, some underperforming stocks may allow investors to purchase the long-term decline. However, many are just dealing with issues unique to their company, such as bloated balance sheets or broken business models.
It might be a while before the market bounces back. In the interim, investors should be aware of the market’s possible value stocks. Even if it is not popular or profitable in the short term, the long-term benefits of investing wisely and deviating from the crowd can be significant, according to the contrarian investing philosophy.
Investing during a market downturn may present chances for sizable returns in the long term. We examine the top 10 blue-chip losers to date and potential opportunities for investors to acquire them.
Pixabay/Public Domain
Our Methodology
To prepare this article, we began by listing all the holdings of the various blue chip ETFs like E.A. Bridgeway Blue Chip ETF, Vanguard Mega Cap ETF, and DOW 30. We then sourced the year-to-date share price returns for each company. Based on these returns, we ranked the companies in descending order.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Tesla, Inc. (NASDAQ:TSLA) is one of the worst-performing blue chip stocks in 2024; the company has come under scrutiny amid soaring competition in electric vehicles. While the introduction of robotaxi was expected to bolster the company’s sentiments, that was not the case.
The electric vehicle giant stock is down by about 9.50% for the year, underperforming the S&P 500, which is up by about 24%. Macroeconomic challenges have hampered Tesla in recent quarters. The company has repeatedly lowered prices to increase demand because inflation and high interest rates have suppressed consumer car spending.
With a 17.6% market share in sales of battery electric vehicles as of July, Tesla, Inc. (NASDAQ:TSLA) was the industry leader. However, compared to last year’s time, its market share decreased by 3.3 percentage points. Net income in Q2 fell 43% to $0.52 per diluted share, operating margin fell 3.3 percentage points, and revenue rose 2% to $25.5 billion.
However, according to Tesla, Inc. (NASDAQ:TSLA), its next big development will be autonomous driving technology. Customers can already purchase subscriptions to its full self-driving (FSD) software. Musk told CNBC last year that FSD software could increase Tesla’s gross margin to 70%, which would be almost four times higher than it was in the most recent quarter. Crucially, Tesla’s data advantage makes it one of the businesses most suited to profit from autonomous driving technology. Compared to other automakers, it has a significantly larger amount of FSD data—roughly 1.6 billion miles—and a large amount of high-quality data is necessary to train the deep learning models that give FSD software the ability to make decisions.
In total, 85 hedge funds were long Tesla, Inc. (NASDAQ:TSLA) in the second quarter, with a total stake value of $4.9 billion.
Here is what ClearBridge Small Cap Value Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) manufactures electric vehicles, related software and components, and solar and energy storage products. The stock contributed as Tesla continued to drive vehicle manufacturing costs lower, accelerate the launch of new models, and invest heavily in its lucrative AI initiatives. Shareholders reaffirmed the CEO’s compensation plan, alleviating personnel and legal uncertainties. Despite material operational complexities resulting in significant shutdowns of key manufacturing facilities and lower sales volume, Tesla presented better-than-expected margins in the quarter. It expects to launch a lower cost model as soon as late 2024, which should result in accelerated revenue growth, reduced manufacturing costs, and increased factory utilization. The company continued to advance its autonomous driving capabilities, expanding its already significant data centers and developing its humanoid robot Optimus. These investments increased confidence in the attractive growth opportunities that remain ahead.”
Overall TSLA ranks 8th on our list of the worst performing blue chip stocks in 2024. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA, check out our report about the cheapest AI stock.
