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Tesla Stock: How Much Lower Will It Go In Latest Sell-Off?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsSep 25, 2020 07:24
uk.investing.com/analysis/tesla-stock-how-much-lower-will-it-go-in-latest-selloff-200447276
Tesla Stock: How Much Lower Will It Go In Latest Sell-Off?
By Investing.com (Haris Anwar/Investing.com)   |  Sep 25, 2020 07:24
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The current steep sell-off in Tesla (NASDAQ:TSLA) shares is not surprising. Those who follow the electric car-maker have seen the boom-and-bust cycles many times during the past two years.

In the latest downside move, Tesla has shed almost a quarter of its value since reaching a record high on Aug. 31. Even with the correction of that magnitude, the stock is still up 356% for the year, making it the biggest gainer among the large-cap technology companies.

Tesla Daily
Tesla Daily

But the reality of investing in Tesla stock is that it can fall as quickly as it goes up. That trend is quite obvious in the current downturn as it is underperforming other tech names.

Behind this massive momentum are the company’s grandiose goals that help fuel share gains, but rarely get delivered. The latest example of this pattern is the recently concluded “Battery Day,” which fell short of investors’ expectations, triggering an approximate 11% slide in the stock value on Tuesday.

Founder and CEO Elon Musk told investors at the much-awaited event near the company’s assembly plant in Fremont, Calif., that he was aiming to produce 20 million vehicles annually, or almost twice as many as Volkswagen (DE:VOWG_p) AG (OTC:VWAGY) sold last year.

With this ambitious production figure, that came without a precise timeline or budget, Musk also told the audience that he plans to build a $25,000 electric car and cut battery costs in half over the next three years.

According to a report in the Wall Street Journal:

“It is the kind of shoot-for-the moon goal that has previously excited investors to make Tesla the world’s most-valuable car company despite selling just 367,500 vehicles last year.” 

“Mr. Musk has a long history of making grandiose claims, some of which have been conveniently forgotten, including promises around robot vehicles and missed production goals.”

Lack Of New Catalysts

The negative surprise from Battery Day comes at a time when investors are shunning the high-flying growth stocks after the post-pandemic rally that sent the tech-heavy NASDAQ to new highs and raised fear of a bubble that could burst.

“With the Battery Day in the rearview, we think there is a lack of upcoming catalysts and are cautious about demand given the recessionary environment,” wrote Robert W. Baird’s Ben Kallo in a note cited by Bloomberg, naming Tesla a bearish “fresh pick.”

Before the latest blow, Musk gained credibility after opening a giga-factory in China in record time and posting four consecutive quarters of profit after several years of struggle as he worked to deliver the Model 3.

But some analysts think these achievements are already factored into the stock valuations. JP Morgan, which has an “Underweight” rating on the stock with the price target of $65 a share, said in a note that like other Tesla investor days, Battery Day was not without its share of lofty goals and grandiose projections.

"Overall, we felt 'Battery Day' was effective in reinforcing confidence in Tesla's ability to continue to lead in terms of battery cost and performance, although we still see the shares as substantially overvalued relative to the fundamentals."

Bottom Line

These cautionary notes remind us that Tesla’s journey to its current level hasn’t been a straight line higher. Since 2018, there have been two waves of selling, each of which pummelled investors, as the stock fell by about 50% every time. Investors should brace themselves for a similar move if the current downward continues.

Tesla Stock: How Much Lower Will It Go In Latest Sell-Off?
 

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Tesla Stock: How Much Lower Will It Go In Latest Sell-Off?

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Comments (8)
Sutharshan Balasuriyan
Sutharshan Balasuriyan Sep 25, 2020 15:27
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Tesla with lot of investment of course means lot of spending then you cant expect earning. Once investment starts to give earning. PE ration will reduce. Stock price will rocket high. This is nonsense article
Jaro Janek
Jaro Janek Sep 25, 2020 14:09
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with multiple inventions in solar, battery and EV and technology years ahead of its competition this stock can easily surpass $1k. Just like following others, it would be great to have the option to blacklist authors who have absolutely no clue what they're talking about and write baseless nonsense articles like this
Ash Nichanametla
Ash Nichanametla Sep 25, 2020 12:24
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100 or less is all it is worth. if u r realist and not in dream land
Hussein Choshman
Hussein Choshman Sep 25, 2020 12:00
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$300 resistance
diabolo Ju
diabolo Ju Sep 25, 2020 11:09
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$100 ish that's all it's worth!
prasanth kumar
prasanth kumar Sep 25, 2020 11:07
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350 resistance
prasanth kumar
prasanth kumar Sep 25, 2020 11:06
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350 resistance
David Baird
David Baird Sep 25, 2020 10:58
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FUD, pure abd simpld.
 
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