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

Published 09/25/2020, 02:09 PM
Updated 09/02/2020, 02:05 AM

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

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 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.

Latest comments

It wint go down Harris,in the sense you put it. Itll see some volatility as any other stock. Tesla is a $650 stock by year end. Thats how all tech companies ever performed. Capital value, followed by profit. Afte all, EV is the future of travelling by road, only if one can imagine the horizon. It had no limit.
Apparently it's going up not down. Longer term it is possible the stock will double over the next 12-18 months on its way to 1000.
Today it goes 10 Dollar lower premarket..... for the shortsellers 😂
Seriously, this guy got paid for this article.. complete nonsense
This is nonsense for a TSLA shareholder only.
Haris, thank you for your insights into TSLA. The drop has been slowing dramatically so I think that $65 target is way off. We will see soon enough where it ends up.
go read the article again? $65 price target is JP Morgan, which its mire tgan what tsla worth based on fundamentals!
looks like a bullish continuation wedge forming now. intermediate to long term.
anyone putting a value of $65 is asleep at the wheel on auto pilot. That is in all probability a terrible bet.
It could drop to 500$ next week😉
for the shortsellers *lol*
Sell off? It still trades at 400
Maybe to poor fella wrote this article in Wednesday and it took the editors 48 hours to approve it? I dunno, if not he needs a drug test.
Dear Anwar seems like dreams never come true. Maybe this article shall about another stock!?
 "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." :-)
Since you asked, i might as well share my opinion : may drop to as low as $277
Please correct this article: JP Morgan does NOT have a $65 PT. That is a single short-seller named Gordon Johnson.
Gordon Johnson is a fool, ranked like 13,500 out of 14,000 analysts on TipRanks. Anyone who follows Johnson will lose money.
Tesla stock is getting ready for yet stellar results. The energy side of the business is still in its infancy. The stock is still cheap at current levels and analyst still don’t understand what is going on!
The ARK fund analysts definitely get it.
Should reflect the market cap of a niche EV car manufacturer - probably low double digits
The selloff ended yesterday at $351. Derp.
65? Target is that CORRECT???
You are right.
That is irresponsibly wrong.
$265
The company Nikola... they couldnt think of something original
NKLA is going to zero after GM admits it made a mistake in its due diligence.
Why did the company take the first name of the man TeslaThats weird
Actually, it's the last name. His name is Nikola TeslaWhy did the company take the first name of the man Nikola. That's weird
If some body know Arabtec in Dubai and its story, he can understand Tesla also.
Is one to assume you didnt buy Tesla months back? I love the “ifs” or “coulds” or “what ifs”! Its a great company any way you slice it.
But recently Tesla started to gain again after the battery day event. Is that just a bubble?
Dead cat bounce!
too cheap
Honestly what changed for stocks in the last few months? The whales decided to take profits and short. Nothing to see hear.  One day we'll wake up and the market makers will be bullish again.
here* not hear 😂😂
ARK is buying low selling high. Of course very enjoying! One thing I really don't get it when there are still think in a linear way, assuming Q3 would be fine, while some have already getting hint there could be hiphup in the coming Q3 results at 27 or 28 Oct 2020.
ARK Invest is buying Tesla stocks every day these days. They seem to like the sell-off.
He is a puppet of his corrupt party. He is creator of his own family scandal.
very bearish as always
How is it a sell off when it just made a good recocery today? Unless the entire market is selling off tesla will not sell of more. If it does, it won’t fall below the 200 SMA. There is a solid chance 10/21 earnings is in the positive and with that lets not forget very likely hood of being added to sp500 which will also make it very likely to hit new all time highs.
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