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Tesla: Buy Or Sell The Stock After A 27% Plunge From Its Record High?

Published 03/22/2021, 09:21 AM
Updated 09/02/2020, 02:05 AM

Now is a good time for long-term investors to take a hard look at their growth portfolios. Many high-flying tech stocks, after an incredible run last year, are currently struggling as investors favor cyclical companies whose shares have more upside as the prospects for reopening the economy grow brighter.

Among growth stocks, Tesla (NASDAQ:TSLA) is one of the most-watched names. Fueled by increasing demand for its electric cars, improving profitability, and the success of its operations in China, shares of the Palo Alto, California-based auto manufacturer gained more than 740% last year, making it the best performer on the S&P 500.

Elon Musk, its founder and chief executive officer, became the richest person in the world in January, before Amazon's (NASDAQ:AMZN) Jeff Bezos reclaimed the title.

TSLA Weekly TTM

But so far this year, the performance of TSLA hasn't been impressive. The stock is down more than 7%. Perhaps worse, if someone bought this name on Jan. 26, when the stock was at its peak, closing at $883.09, the year-to-date losses are close to 30%.

Nevertheless, the stock has a history of boom-and-bust cycles. If you’re a buy-and-hold investor, chances are you’re still seeing quite a bit of profit on your position. During the past five years, Tesla stock is up more than 1300%. It closed on Friday at $654.87.

Even after this brief bearish spell, some of Tesla’s most bullish analysts remain loyal. They continue to see strong gains ahead in coming years.

$3-Trillion Company

Among those who favor Tesla shares is Cathie Wood, whose ARL Invest Management holds a large stake in Tesla. According to the fund’s latest note, TSLA could hit $3,000 by 2025, which would give the company a valuation of almost $3 trillion.

There’s a 50% chance of Tesla achieving fully autonomous driving within five years, which could allow the company to scale its planned robotaxi service quickly, according to a note posted Friday on ARK’s website. ARK is also bullish on Tesla’s insurance business which collects highly detailed driving data. The unit could expand its offerings in other regions, benefiting the company from its better-than-average margins.

Of course, it's anybody's guess if Tesla stock will reach that level. But the general market consensus is that this is not a good time to buy Tesla shares. On Friday, a report surfaced that regulators in China plan to ban Tesla vehicles from military installations and housing compounds on concerns that the vehicles' on board cameras could be used to collect sensitive data for the company.

As well, Tesla is the least appreciated stock among the group of mega cap growth stocks, said a recent post on TheStreet.com, including Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), with only 38% approval on Wall Street. And when it comes to a price target, analysts are projecting an average loss of 14% on Tesla stock.

Along with this bearish tone, there are also growing concerns that the EV market won’t be as easy a ride for Tesla as many of the stock's bulls believe. Traditional automakers, like Volkswagen AG (OTC:VWAGY) and General Motors (NYSE:GM) are accelerating their EV efforts.

VW’s stock received a major boost this month as some analysts turned bullish on electric vehicle ambitions. UBS Group analysts in a recent note praised VW's first mass-market model built off a dedicated EV platform, the ID.3 hatchback. The car is “the most credible EV effort by any legacy auto company so far,” wrote Patrick Hummel, who raised his price target on the shares.

Bottom Line

There are many factors tarnishing some of the shine of Tesla stock after a standout year. The continuation of such a powerful run is highly unlikely when investors are shunning growth stocks in favor of cyclicals.

In addition, with competition heating up in the EV market, we'd urge caution. We believe there will be a better entry point in the days ahead for those who want to play the Tesla trade and hold this stock in their long-term portfolios.

Latest comments

No worries Biden and OCS are working a deal with Elon that on the last stimmie everyone in the USA gets a Tesla and the Green Ne Deal is paying for it, plus you get free insurance compliments of OCS so take the free cars and by tesla stock support your government..
if the government really wanted to help the working class, the poor, and minority races, they would make it a felony to make stock predictions without verifiable fundamentals. if she does spike the market for naught, billions will be lost by said middleclass, the poor, and minorities, rushing to cover rationally placed short positions.
sounds like a pump and pump. its perverse the way they pump up stock valuations today, where a stock might trade in 10 years? maybe there's something to it, but if not, it should be a prosecutable crime with deep momentary and long prison time sentencing.
the pure functionality of the Tesla Model Y is very attractive. it's the price of new cars today. I want one so badly. if only the look matched a competitor like the Mach E.
I bought 3 / 600 calls for next year. I couldn't resist the dip. if I think it's still cheap, it's probably still cheap. they're in the same spot when Amazon was thought to be a book selling business
great job
Unrea how real negative interest rates are wracking the world and the economies. I would buy it at $40
Yes after several splits 5:1 good luck
Don't buy. Hold.
Hold. Don't buy. Tesla's competition is growing and the China market will only become a bigger challenge to Tesla. Checks from the government for emissions credits are going to start drying up. That's The only thing that has kept Tesla's auto business out of the red.
Tesla is not only car. There are multiple verticals which will draw profitibility over the next few years. Solar, insurance, robotaxi, energy. Lot of growth potential over the coming years. Silo articles are not helping anyone
Haha as if military complexes in china and other countries let other cars with cameras roam free. Thats a general case for all car companies not just tesla. Why you bears cant put your bias aside?
TSLAs only competition is VWAGY. Elon will be in India soon and yall will miss the boat! Chris Wood is right.
Who is Chris Wood?
Well you know apart from Ford, Apple, Baidu, Nio etc etc etc
Well, not expanding into empty space anymore. Massive competition and Tesla is not a premium brand due to sloppy quality. It was just a toy for some who could afford 2nd or 3rd car. Margins will vanish as the market gets flooded with ev cars of much better quality The chart has a flaw. That weekly spike was never there. Check yahoo.
Tesla is a good long-term play but the value has got way ahead of itself due to money supply and low-interest rates. Still big risks for Tesla with new entrants e.g Apple, incumbents switching to EV and teaming up with Tech companies e.g VW / Ford, and China tensions (which is by far its biggest growth market). Think a good buy point would be closer to $400 - certainly no way near $600+
Good prospects in long term, more than 15years, but currently should not commend value of more than $100/share. 1000 p/e is just pure madness and idiocy....bottomline: short this Tesla.
If Tesla 3k, Gme should be 1k at least lol
Sell, no doubt.... want to invest in EV that will flood the market? Buy VW and BMW, not Tesla....
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