"Ah Musk" Tesla's Market Cap Falls Below $500 Billion... Will LVMH Overtake?

The market capitalization of Tesla, a U.S. electric vehicle company, has fallen below $500 billion due to worsening profitability forecasts.

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On the 26th (local time), Tesla's stock price closed at $153.75, down 4.31% from the previous trading day on the New York Stock Exchange. Its market capitalization recorded $487.3 billion, dropping below $500 billion.

Tesla's stock price has been plummeting for six consecutive trading days since just before the market closed on the 19th, when the company announced its first-quarter earnings. The decline during this period amounts to 15%.

The reason for Tesla's stock price decline is growing concerns that CEO Elon Musk's vehicle price reduction strategy will damage profitability. After announcing the first-quarter earnings, Musk revealed a strategy to lower vehicle prices, reducing profit per unit while expanding sales volume. Wall Street has issued negative forecasts regarding Tesla's profitability, which led to the stock price drop. Tesla's stock price had risen 50% since the beginning of the year to $184.31 on the 18th, the day before the first-quarter earnings announcement, but fell 15% to $153.75 over the following six trading days.

Tony Sacconaghi, an analyst at Bernstein, said, "Despite significant price cuts, demand for Tesla remains challenging, and price elasticity is weaker than Tesla expects. We believe price reductions will harm the profitability of the industry, including Tesla, and will continue to do so, but it seems unlikely that well-funded market participants will withdraw."

Besides Musk's aggressive business strategy, his successive eccentric behaviors are also cited as reasons for Tesla's stock price volatility. When Musk acquired the social networking service Twitter at the end of October last year, concerns arose that he was neglecting Tesla's management, causing the stock price to fall as much as 65% at one point. He has also engaged in various eccentric acts. After acquiring Twitter, he suspended numerous accounts of major media journalists and, two months later, put to a vote whether to resign from his CEO position. Recently, he has continued 'owner risk' behaviors, such as automatically sending poop-shaped emojis to journalists who send inquiry emails to Twitter's media response email.

Bloomberg News forecasts that Tesla's market capitalization will soon be surpassed by oil giant ExxonMobil or French luxury company Louis Vuitton Mo?t Hennessy (LVMH). ExxonMobil's market capitalization currently stands at $468.6 billion, showing an upward trend with its stock price rising about 10% over the past month. LVMH's market capitalization exceeded $500 billion for the first time among European companies on the 24th, reaching 454 billion euros, and as of the 26th, it stands at 436.8 billion euros.

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