So much for the “Magnificent Seven.” Many are revising their acronyms for the top tech stocks in the market, with some removing Tesla (NASDAQ:TSLA) as a result of its poor performance, leading to calls for the “Spectacular Six,” or if one removes Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), the “Fab Five.” Indeed, given the recent performance of TSLA stock on most near-term time frames, such a view seems to make sense.
This sort of narrative is continuing to pick up, as Tesla recently fell out of the top 1o list of companies ranked by market capitalization in the S&P 500. Underperformance relative to its mega-cap peers has been stark, and Tesla investors are increasingly appearing to jump ship in favor of other high-flying tech names, most notably Nvidia (NASDAQ:NVDA), which crossed $900 per share today and made a new all-time high.
So, does this mean it’s “rest in peace” for Tesla, or should investors buy the dip? Let’s dive into what to make of this move.
RIP TSLA Stock: It’s No Longer a Top 10 Tech Play
Tesla’s fundamental performance this past quarter has certainly stoked plenty of concern among existing investors. So much so that analysts, such as those from Morgan Stanley have cut earnings forecasts for the EV maker on the basis of continued price cuts and weakening demand in the EV space.
Sure, Tesla is more than a car company, and most analysts still have price targets well in excess of where the stock is trading now. Tesla could certainly benefit from broader secular trends around AI and robotics. But there are a myriad of other companies with better growth fundamentals and stronger margins to consider. In a world where competition for capital is picking up, TSLA stock looks relatively less attractive.
This is the key thesis I think is playing into Tesla’s underperformance this year. The fact that TSLA stock is down more than 25% on a year-to-date basis alone means less demand for call options and speculative trading trends from momentum investors (that capital is clearly going toward names like Nvidia right now). Thus, for the time being, it’s hard to foresee what sort of catalysts could propel Tesla higher, particularly if upcoming earnings reports are weaker than expected.
On the date of publication, Chris MacDonald 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.
