Tesla Stock Plummets: Investors Wary Despite Recent Rally
Tesla Inc.'s stock has shed approximately a quarter of its value in under two months, erasing nearly $400 billion in market capitalization. Amid this turbulence, Wall Street analysts caution investors against jumping into the fray.
As the worst-performing stock among megacap peers this year, Tesla's shares remain overpriced despite deteriorating sales in key markets. Technical analysts also express concern, predicting further downward movement in the near term.
The stock's recent rally provides little solace, as strategists like Mark Newton of Fundstrat see potential for a drop to pre-US election levels around $314, representing an additional 12% decline.
Tesla's business outlook has weakened, with dialed-back sales expectations and disappointing figures from major markets. Chris McNally of Evercore ISI notes a lack of imminent triggers for a rebound, as updates on the self-driving car project are expected no sooner than June.
Tesla's valuation remains elevated, with a price-to-earnings ratio of 119, significantly higher than the industry average of 30 and the S&P 500's 22. Analysts estimate a 19% growth in 2025 profits, but Steve Sosnick of Interactive Brokers highlights the potential for significant downside in case of any disappointment.
Options market sentiment has shifted towards bearishness, with increased volatility signaling that traders are preparing for potential declines. Matt Maley of Miller Tabak + Co. expects continued weakness in Tesla's stock despite the recent bounce.