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Cathie Wood Bought TSLA Stock on the Post-Earnings Dip. Should You?

  • Tesla (TSLA) reported Q3 earnings yesterday, disappointing Wall Street.
  • While the company slightly beat earnings expectations, its revenue fell short.
  • However, Cathie Wood is sticking to her playbook and just purchased more.
"TSLA stock" - Cathie Wood Bought TSLA Stock on the Post-Earnings Dip. Should You?

Source: Zigres / Shutterstock.com

On Oct. 19, Tesla (NASDAQ:TSLA) reported earnings for the third quarter of 2022. After the company’s turbulent year, investors needed to see concrete evidence that Tesla is still on track for growth in 2022. Unfortunately, the electric vehicle (EV) leader reported mixed results, slightly beating on earnings per share (EPS) but failing to meet revenue expectations. This news sent TSLA stock straight into the red. Although shares rebounded yesterday, they have been volatile today and are up just 2% as of this writing. While some experts have soured on Tesla, others are regarding the recent downturn as an opportunity to acquire more shares on the dip. Cathie Wood responded to the Q3 earnings by doubling down on TSLA stock.

This isn’t Wood’s first time buying TSLA this month. In early October, both her ARK Innovation ETF (NYSEARCA:ARKK) and ARK Autonomous Technology & Robotics ETF (BATS:ARKQ) increased their TSLA stock holdings after the company’s disappointing quarterly deliveries pushed shares down. Now Wood is repeating the same pattern, once again making it clear that she sees significant growth potential for the beaten-down EV stock. Let’s take a closer look at Wood’s latest bet and what it may mean for investors.

Wood Believes in TSLA Stock. Does the Market?

How many shares did Wood purchase this time? Bloomberg reports that ARKK, her flagship fund, added 66,190 shares of TSLA stock. This brings the current market value to $629,210,047.68, encompassing just over 9% of the portfolio. Tesla is the fund’s second-largest holding, second only to Zoom (NASDAQ:ZM), a fellow beaten-down tech stock that has declined even more than TSLA year to date (YTD). It remains the largest position for ARKQ, which owns $86,389,743.84 worth of TSLA stock.

Wood may have just made a big bet on TSLA stock, but other experts aren’t so optimistic. Musk recently stated that he believes Tesla’s valuation could someday exceed that of Apple (NASDAQ:AAPL) and Saudi Aramco. However, not all of Wall Street shares this sentiment, and the Q3 revenue miss doesn’t help Musk’s case. Analysts from both JPMorgan and Bernstein issued bearish takes on TSLA stock following the report.

Another expert who shares this bearish sentiment is InvestorPlace Senior Investment Analyst Luke Lango. After Tesla’s Q3 earnings miss, he reported that he saw the company’s slowing growth leading to a diminished market share in the coming year. Lango carefully noted that the problem he saw is specific to Tesla and should not be attributed to falling EV demand. As he reports:

“Tesla still dominates on accessibility. But that’s about all it dominates on these days in the EV world. Its long-held price, branding, and performance advantages no longer exist. As a result, we believe that price-sensitive, brand-conscious, and performance-driven prospective EV buyers will increasingly opt for Lucid (NASDAQ:LCID), Rivian (NASDAQ:RIVN), AudiMercedes (OTCMKTS:MBGYY), and BMW (OTCMKTS:BMWYY) EVs over the next few years. “

What Comes Next

Investors know that Wood’s brand of investing centers around buying beaten-down high-growth stocks at their lowest points. That makes Tesla a tempting buy right now. But the Q3 earnings miss raises some questions. Specifically, will TSLA stock be able to rebound in the coming year? It’s difficult to say but the fact that Musk is about to purchase Twitter (NYSE:TWTR) has made some experts apprehensive about Tesla’s growth prospects in the near future. Additionally, if Lango’s thesis is correct, EV buyers will be more likely to turn to other automakers in the coming year, making for a more difficult industry landscape.

On the date of publication, Samuel O’Brient 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.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/10/cathie-wood-bought-tsla-stock-on-the-post-earnings-dip-should-you/.

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