Tesla (NASDAQ:TSLA) has been swooning lately, but not due to fundamental reasons. Keep in mind, TSLA stock enjoyed an initially strong rally after the company reported better-than-expected earnings. Despite various headaches over the last few months, the company continues to find a way to deliver.
So what’s the issue? CEO Elon Musk has been selling stock to make room for his purchase of Twitter (NYSE:TWTR). After Musk’s $44 billion Twitter buyout, he sold 9.6 million Tesla shares worth $8.5 billion. According to a tweet from the billionaire, he has no plans to sell anymore Tesla stock. However, investors have ridden through this storm once before.
Musk was unloading billions of dollars worth of stock in late 2021 as he made room for his tax bill (due to awards of stock options). The selling made constant headlines as Musk made tongue-in-cheek tweets — there’s some irony — with U.S. Senators. As Musk unloaded, the stock price whipped around violently.
That said, TSLA stock eventually recovered to all-time highs. The question now is, can it do so again? On April 26 alone, shares lost 12% and shed $125 billion in market capitalization. From last month’s high on April 4 — and the day Twitter stock erupted on the rumors — Tesla has now fallen 22% and lost a whopping $270 billion in market cap. (That’s more than six Twitters at Musk’s buyout price, by the way).
Investors are obviously concerned that this event combined with the current market conditions will create a one-two punch for the share price.
On a good note for the company, its biggest plant — the Shanghai Gigafactory — has restarted production after being shut down for 22 days. Tesla reportedly plans to expand its Shanghai factory by building a new plant near its current location. The company hopes to become “the world’s largest vehicle export hub,” with its new plant expecting to have an annual capacity of 450,000 cars.
Keep in mind, the Shanghai plant delivered 484,100 vehicles in 2021.
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As for the charts, it’s possible that TSLA stock retests the lows from here. If the selling pressure keeps up, watch the April low at $821.70.
A break of that area and failure to get back above could open the door down to the $750 area. Below that and the 2022 low is in play near $700.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
