Despite my long-term bullishness, I concede that the wild swings in the markets have been discomfiting for my readers. Truly, we’re witnessing an unprecedented response to this crisis that will impose both societal and economic scars. As you might expect, companies which are levered to consumer sentiment like Tesla (NASDAQ:TSLA) have taken a beating. At one point, TSLA stock was driving toward four-digit prices. Now, it’s well off its record highs.
Nonetheless, with shares above $500, TSLA stock is actually one of the best-performing stocks of this year, up nearly 21%. That’s remarkable considering that the Nasdaq Composite is still down about 15% year-to-date despite recent substantial momentum.
On Wednesday, the Senate approved a historic $2 trillion stimulus package, designed to support floundering businesses and provide immediate relief to American families. And Friday it passed in the House of Representatives.
However, many questions remain about how the U.S. will fight the coronavirus from China pandemic, and more importantly, how we as a nation will recover. Understandably, broader hesitation exists toward discretionary retail names. Nevertheless, I believe investors can find encouragement that TSLA stock has remained strong amid the turmoil.
That said, here are a few reasons why you should consider Tesla’s market discount.
TSLA Stock Has a Great PR Boost
On Thursday, it was announced that the U.S. leads the world in coronavirus cases. Although it’s not a great statistic, anybody that has been closely following trends understands that this was inevitable. As I’ll explain later, it doesn’t take away from the fact that we’re heading toward the end of this crisis.
Unfortunately, the one concerning outlier is the state of New York. At time of writing, it had nearly 39,000 cases, a figure that will explode higher over the next 24 hours. The most crucial problem is that hospitals in high-risk areas such as New York City are desperately running low on beds and ventilators.
However, Tesla is stepping up big time, with CEO Elon Musk announcing that he will reopen the New York Gigafactory quickly to manufacture ventilators for Covid-19 patients in that state. For people suffering from the disease, this move is a godsend.
Additionally, the perception of the government response has been very negative. Thus, Tesla has the opportunity to play the hero. But will that help TSLA stock?
Obviously, it couldn’t hurt. But various studies demonstrate that “modern consumers trade in the currency of goodwill.” And with word of mouth traveling at the speed of light, this is a huge moment for Tesla and TSLA stock.
Traditional Automakers Can’t Take Advantage
That said, not everything is going Tesla’s way. A significant headwind is that Saudi Arabia and Russia are now engaged in an oil price war. Because this deeply affects the domestic oil industry, the U.S. has urged Saudi Arabia to stand down.
We’ll see what comes of it. Even if the Saudis end the oil war, it won’t immediately send oil back to prior highs. After all, this isn’t just a supply issue but rather a demand problem. Thus, with lower prices at the pump, this dynamic theoretically bolsters traditional automakers like General Motors (NYSE:GM) and Toyota (NYSE:TM).
The thing is, their shares are in the red for the year, whereas TSLA stock is well in the black. In my opinion, cheap gasoline prices alone won’t reverse this circumstance.
As you know, the pandemic has been brutal for all automakers due to global supply chain disruptions. Mathematically, though, this headwind impacts traditional manufacturers over the long run more so than it does Tesla and other electric vehicle companies.
That’s because EVs have fewer moving parts, translating to a simpler, streamlined platform. On the other hand, a car with an internal-combustion engine has tens of thousands of parts. Some could be critical, meaning that a little component built in some far-off land could keep you grounded indefinitely.
Bottom Line on TSLA Stock
Tesla remains one of the best-performing stocks on the market in 2020 so far. Additionally, it doesn’t stand to be impacted as hard by the coronavirus as some of the other automakers — meaning TSLA stock remains an interesting pick here.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
