Tesla Share: Is it a Value Buy or a Falling Knife?
· Tesla is down 54% so far this year.
· The automaker continues to face pressure from macro-economic as well as company-specific headwinds.
· However, analysts are of the view that the stock is attractively priced after this major decline.
Tesla Price Performance
Tesla, the Elon Musk owned electric vehicle major has been in rough weathers for a while. The stock is down 54% so far this year and its market capitalization has dwindled to $530.1 billion. A far cry from its trillion dollars valuation days in April.
So, what has been the cause of this decline and does the company and its charismatic owner have the wherewithal to make a comeback? Let’s try and find out.
Reasons for Tesla’s Price Decline
· Falling Demand: The global economic environment is plagued by high inflation levels and interest rates. Consequently, the consumer sentiment for discretionary purchases like electric vehicles are low. This has hurt the demand for Tesla cars massively as people are more inclined to spend on essentials.
· Twitter Saga: Elon Musk’s adventure of buying the social media platform Twitter for a pricey $44 billion is misplaced or not, that only time can tell. However, to fund this purchase, Musk is appearing to mete out a “step-fatherly” treatment towards Tesla. Notably, earlier this month, the 51-year-old sold Tesla shares worth $3.95 billion, taking his tally to about $19 billion for the year. Additionally, Musk sold roughly $22 billion worth of shares in 2021.
As a result of this huge selloff, the share price has taken a severe beating and the retail investors who hold the share has borne the brunt, seeing their investments in the stock declining rapidly.
· Stricter Chinese Covid Norms: Finally, Tesla has also suffered because of the strict Covid lockdown norms in its primary manufacturing hub of China. Due to these uncertainties, the automaker’s production has been suspended multiple times and its operations stood disrupted.
Tesla Share Price: Brokerage Radar
Interestingly, analysts are turning their opinions on Tesla. They believe the stock’s valuation has reached attractive levels and the downside risk is limited.
Morgan Stanley remarked that Tesla’s share price has nearly reached its “bear case” price of $150 and the risk-reward scenario appears favourable form here.
Notably, Citi has also upgraded its rating on the company from “Sell” to “Neutral”, citing attractive risk-reward scenario.
This is not an investment advisory. The blog is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.