Matein Khalid
Tesla (TSLA) was a fairytale in 2020 when it soared 740% after which 50% in 2021. The fairytale has morphed right into a nightmare in 2022, with the shares down 52% from their January highs of 402 to 168 as I write. What went improper?
One, 2022 has been an annus horribilis for NASDAQ, which is down 32% YTD. Since Tesla has a inventory market beta of 1.50, buyers shouldn’t be shocked whether it is down 50% as that is its historic correlation and volatility relative to the index. This drop has been a catastrophe for Elon Musk because it has value his web value to vaporize by $200 billion. Unquestionably the mom of all monetary ache factors for the South African cyborg who will in the future teleport the human race to outer area.
Two, excessive rates of interest/inflation enhance the borrowing prices of shopping for a luxurious automobile for customers concurrently their disposable incomes plummet in actual phrases. So all EV shares have gotten slammed and Tesla is not any exception. The EV enterprise will get much more aggressive as auto colossi like Basic Motors, Volkswagen and Toyota ramp up their EV choices. It’s not precisely coincidental that GM, VW and Toyota shares have all significantly outperformed TSLA prior to now six months, a state of affairs that may have been heresy again within the Stone Age circa 2020.
Three, arithmetic of discounted future money flows hits all progress shares with excessive valuation metrics when the Fed turns ugly and rates of interest spike larger. TSLA trades at 34 occasions ahead earnings, so I’d not be shocked to see it commerce right down to 120. The issue with progress shares is that their market cap may be slashed by 50% as has occurred to TSLA, but they discover no help from worth funds as they’re nonetheless thought-about means too costly. TSLA was the quintessential progress inventory in 2019 to 2021 and now should pay the worth for this.
4, EV demand in China has clearly plummeted because of the property meltdown, collapse in financial progress, draconian covid lockdowns and epic falls on the Shanghai/Shenzhen inventory alternate, particularly for Chinese language tech shares. That is the rationale NIO is down 70% in 2022 and TSLA has not been unscathed by the drop in Chinese language demand and logistics/provide chain disruptions within the Shanghai giga manufacturing unit.
5, Musk has grossly overpaid for Twitter and needed to promote $19 billion in Tesla shares, not precisely a vote of confidence for TSLA. Discover that he has hardly tweeted in any respect on TSLA (SEC?), eradicating one other supply of hype and froth.
Six, TSLA charts scream promote to me because it has misplaced its momentum and violated vital help ranges. This pet was as soon as a Doberman Pinscher however is now simply one other NASDAQ canine headed south.
Seven, I simply don’t see any main product launches that may transfer the needle and thus TSLA on the horizon and reverse its present bearish channel. My technique now could be to attend till the shares decline within the mid-140s after which start to design possibility methods the place my worst case state of affairs is to take supply of TSLA at 120 to 125.
Additionally revealed on Medium.