It’s Time to Lower Your Expectations for Tesla Stock

The electric-vehicle maker's ambitions won't be enough to save TSLA stock from struggling

From May of last year until mid-March of this year, it felt like Tesla (NASDAQ:TSLA) stock was unstoppable. The journey from under $200 to over $900 was breathtaking to behold. Skeptics sensed that this trajectory was unsustainable, and they were right.

TSLA Stock: It's Time to Lower Your Expectations for Tesla
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Due to the coronavirus from China, TSLA stock relinquished months’ worth of gains in a matter of weeks. It was a hard lesson to learn for investors who bought into the hype at the wrong time. Now, Tesla fans have to grapple with concerns that more fiscal damage could be in store. So is there a turnaround coming, or just more pain?

The Controversy Continues

Few companies are as controversial as Tesla. The debate over hybrid-electric versus combustion-engine vehicles rages on. Founder Elon Musk’s wild personality only adds fuel to the fire. Traders just love to talk about TSLA stock.

Analysts love to talk about it too. They either seem to love it or hate it. There’s not much room for middle ground here, apparently. The spread between the low and high ends of the analyst community’s price targets is $500. That’s an unusually wide spread and it’s emblematic of how divisive this company is.

Two extremely bullish Tesla analysts are predicting that the stock will reach $800. One of them is New Street Research analyst Pierre Ferragu. He upgraded his rating on the stock from hold to buy.

Another market expert with an $800 price target for TSLA stock is Piper Sandler analyst Alexander Potter. He recommends buying the shares on the recent “market dislocation,” which sounds like a fancy way of advising that traders should buy the dip. The word “dislocation” also seems to imply that the dip is unjustified.

For bearish analysts, the price targets on Tesla stock reach as low as $300. That might sound pessimistic, but bear in mind that the automotive industry is suffering now. For the month of March, light-vehicle sales in the U.S. are projected to decline 30% to 40% year-over-year.

Keep Your Hopes Low

Moreover, as Benchmark analyst Michael Ward observes, “Showroom traffic dropped 25-50%” during just one week in March and “[ground] t0 a halt the last 10 days of the month.” This isn’t all Tesla’s fault, of course. However, it’s evidence that this isn’t the right time for lofty goals in the automotive market.

Besides, there is negative news specific to Tesla. First of all, Tesla relented to regulatory pressure to shut down most of the automaker’s operations in its factory in Fremont, California.

Then it was reported that two Tesla employees were diagnosed with COVID-19. The locations of the two employees wasn’t disclosed, but it was announced that they were under quarantine.

On top of all that, there was a startling announcement of a major staff reduction at Tesla’s “Gigafactory” in Nevada’s Storey County. Details were provided by Storey County manager Austin Osborne:

“Tesla has informed us that the Gigafactory in Storey County is reducing on-site staff by roughly 75% in the coming days.” Meanwhile, the company also indicated that they are “Checking employee temperatures, creating central access, allowing remote work, maintaining workstation distance, and others are occurring.”

There’s also the decline in the oil price to consider. Low-priced gasoline could make electric vehicles less enticing. All in all, it’s hard to justify an $800 price target for TSLA stock at any point this year.

The Takeaway on TSLA Stock

The controversy surrounding TSLA stock won’t die down anytime soon. The bulls and bears will continue to wrangle over which way they think the price will go. Given the number and severity of negative factors at work, the bears are likely to be vindicated for this year at least.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarketsFinom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/03/lower-your-expectations-for-tesla-tsla-stock/.

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