Tesla shares have lost all of their gains since early December 2020 amid investor concerns about rising bond yields and a sell-off in high-value stocks. Since its peak, which was reached on January 26, quotes have lost almost 35%. The fall in Tesla shares during this time was much deeper than that of other Wall Street heavyweights: Amazon, Microsoft and Facebook.
Should you buy Tesla shares now? Alexey Voilov, the author of the Invest Foundation Telegram channel about investments, answered the question of Forterider magazine.
– Now Tesla is, perhaps, one of the most popular companies not only on the US stock market, but all over the world. Let’s look at all the pros and cons.
Positive factors for Tesla stock:
- A global course towards the use of electric vehicles, generating strong demand for them.
- There is a high likelihood that the next 400,000 Tesla electric vehicles will receive federal tax breaks of $ 7,000.
- Constant expansion of the company’s scope of presence, including very promising Chinese and European markets.
- Updates to the S and X models, which will begin shipping in April 2021, as well as consistently strong demand for the Model S Plaid Tri-motor.
- The launch of the Tesla Engage platform, a kind of Tesla social network.
- CyberTruck update scheduled for mid-April 2021.
- Tesla shares are one of the main assets of the Ark Innovation ETF Katie Wood, which showed a return of about 150% last year.
Negative factors for Tesla stock:
- The economic recovery is forcing investors to move capital from tech stocks to cyclical companies.
- A global shortage of semiconductor circuits, which has already negatively affected many companies, could disrupt production schedules. Tesla’s Model S and Model X production was suspended at the end of February, and production of the Model 3 was completely shut down due to a lack of parts.
- Growing competition from traditional companies such as Ford Generals Motors. In the US, in February, Ford Motor’s Mustang Mach-E sales were higher than Tesla’s.
- The presence of Tesla shares in the investment portfolio of the same Ark Innovation ETF means that in case of disclosure of information about their sale, and Ark Invest publishes a report on purchases and sales on a daily basis, they can sharply negatively affect Tesla’s quotes.
- The company’s purchase of bitcoins in the amount of $ 1.5 billion. Firstly, this partially reduced the level of confidence in Tesla among investors with conservative and traditional views. Secondly, the stock price became dependent on the bitcoin price. It is possible that the cryptocurrency may seriously collapse, dragging Tesla quotes behind it.
It is worth mentioning that a strong supporter of the Tesla short is Michael Burry, who predicted the mortgage crisis of 2008 and became the prototype of the protagonist of the movie Short.
As a result, the current drawdown of Tesla shares should not be used for speculation. But for those investors who are not afraid of risky investments, now is the right time to include these securities in medium and long-term portfolios.