Shares in Electric Vehicle (EV) industry leader Tesla (NASDAQ:TSLA) dropped 4% earlier in the month. The reason for the drop? CEO Elon Musk sold more of his shares in the company. With Tesla’s CEO unloading nearly $10 billion of his stake in the company this month, is this a sign that potential investors should be wary? Or, is the recent drop the opportunity to add some high-flying TSLA to your portfolio?
It all depends on your perspective. TSLA has a “B” rating in my Portfolio Grader. It’s a reasonably solid long-term growth pick, but not infallible. And at this point, investment analysts have decidedly mixed opinions on where Tesla shares go from here. However, you should be making any decision about whether to add TSLA stock to your own portfolio based on the company’s performance and the state of the EV industry rather than the current moves being made by its CEO.
Musk Sells TSLA Stock (Again), and Markets React Negatively (Again)
On Tuesday Nov. 23, TSLA stock closed at $1,109.03 for a 4% loss on the day. The reason for the drop was a move made by CEO Elon Musk. After exercising options to buy 2.15 million Tesla shares, Musk sold over 934,000 of them for $1.05 billion.
This brings Musk’s total sales of TSLA stock this month to 9.2 million shares worth $9.9 billion. Earlier in the month, shares dropped 12% in the stock’s largest loss of the year after Musk took to social media to announce he planned to sell 10% of his Tesla stake to help offset a tax bill.
Analysts Remain Cautious About TSLA Growth Prospects
If you’re looking to investment analyst recommendations to buy Tesla shares, that’s becoming more challenging. Tesla has its fans among analysts, but the sentiment is far from universal. The Wall Street Journal is tracking 41 analysts with Tesla coverage. While 15 of those have a strong buy recommendation, the consensus rating for TSLA stock is hold, as it has been for months. Their average 12-month price target is $839.75, which represents a considerable downside of 24%.
That being said, even after that 12% drop a few weeks ago, Jeffries dramatically hiked its TSLA price target from $950 to $1,400.
Bottom Line on TSLA Stock
Once again, we come back to a TSLA stock investment at this point being a matter of perspective.
Those who feel that the company is an unstoppable EV force aren’t going to care about a 4% drop. After all, even after Tuesdays’ drop and the much larger one on Nov. 9, TSLA stock is still up 8% so far in November, and 52% to this point in 2021. That’s impressive momentum for a company worth as much as Tesla.
On the other hand, for those who worry that with a market cap of around $1.1 trillion — more than three times the value of the world’s second-most-valuable auto maker — TSLA stock is overvalued, it might be time to wait and see. Many analysts are clearly expecting a correction in the coming months. Also in this camp would be those who are watching traditional auto makers ramp up their own EV offerings, while startups like Fisker (NYSE:FSR) become more of a threat.
What about the issue of Elon Musk selling billions of dollars in Tesla shares? I think InvestorPlace contributor Will Ashworth put it perfectly when he wrote, “I don’t think you should worry yourself with the billionaire’s stock sales.” If you were already considering a TSLA investment, take the market reaction to Musk’s latest move as a gift that makes your purchase a little less expensive.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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