Let’s start by looking at the Tesla chart
It already accumulates a drop of more than 70% from its all-time highs. Not only is the magnitude surprising, but also the short time. Let’s remember that Tesla was worth $415 just 13 months ago. Now? Only u$s 123. And only in December it already has a brutal fall of 37%.
What has happened for him to have had such a fall in recent times? There are several factors. On the one hand, let’s remember that Tesla had an astronomical valuation, which was clearly supported by interest rates close to 0%. Now, the situation is different: the Federal Reserve is with a much more restrictive stance and investors are not going out to pay at any price.
On the other hand, there are the company’s own problems and the demand for electric cars. The recessive effects are already beginning to hit their sales. Also, recently, they announced a plan to temporarily halt production at their China factory. And the company offered a $7,500 discount on its two best cars. This added uncertainty and mistrust to investors, who are doubtful about possible future demand.
Just two and a half months ago, Tesla was 42% below its all-time high. And many investors were desperate to buy their shares, since they were already “they had fallen a lot”.
At the time, I raised the debate about whether it was a good idea to buy Tesla (Tesla 42% below its highs: a good idea to buy?). In that note, I stated the following:
“The first thing to clarify is that nobody sees the future. But looking at what’s going on in the market as a whole, it wouldn’t be a good idea to buy Tesla today. Global stocks are suffering one of the worst years in their history, affected by the rise in interest rates to deal with runaway inflation. So the context doesn’t help at the moment. And in this case there are other risk factors. On the one hand, the conflict with the supply chain, which affects all manufacturing companies. In addition, Tesla faces the possible consequences of a recession: a consumer with less money would negatively impact its sales. Last but not least, it is vital to understand what the charts are showing. And the Tesla stock chart shows a clear downtrend. Does it mean that it will continue to fall? No one knows, but the odds are on that side.”
And now that it has already fallen by 70%, what do we do? Is it a good idea to buy Tesla today? The conclusion is the same that I commented in that note. Nobody knows what is going to happen. For now, given the global context, the conflicts Tesla is facing and analyzing his graph, this is not the time.
Could someone buy Tesla today and have guessed the “floor”? Yeah, but doing that all the time is a bad idea, even though every once in a while it might work. Buying what falls is simply a lousy investment policy.
And when will be a good time to invest in Tesla? First and foremost, when their stocks stop falling and start showing positive signs. For now, Tesla is a “knife falling” and you shouldn’t try to stop it. Also, you’ll need a more action-friendly global context to give you some breathing space. For now, we are not in that situation.
It is worth clarifying that the company can continue to grow (as it has been doing in recent years), but that does not necessarily imply that its shares have to rise. It is evident that Tesla, at the company level, is simply spectacular. What is discussed here is when it is convenient to invest in their actions.
The market always seeks to anticipate and, for now, it is falling out of love with Tesla, after the excessive euphoria experienced in 2020 and 2021. To follow it closely.
The current situation is very challenging: record inflation, rising interest rates and stocks suffering huge losses. That’s why I prepared a report with 3 ideas to take advantage of the context. I really recommend it. You can download the report here: Financial Letter – actions.
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
