Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.

2022-12-17 11:29

Tesla Stock Continues to Fall
Usually, when Tesla ($147.05|-1.92%) CEO Elon Musk is making headlines, it has been a positive thing for Tesla shareholders. Unfortunately, ever since Musk acquired the social media platform Twitter, Musk’s headlines have had nothing to do with his electric cars. In fact, on the surface, it appears that Musk is much more involved with his shiny new toy than with the company that made him his immense wealth.

Shares of Tesla had another bad week, falling by about 14.5% since Monday. Now, it was a pretty bad week for the markets overall as the Fed continued with its hawkish stance on inflation. But the sell-off for what was one of the world’s most popular stocks has been a painful one for investors. On Thursday, it was announced that Musk sold another $3.6 billion worth of Tesla stock, prompting a 4.72% sell-off on Friday to close the week. So that begs the question, when will Tesla’s stock be oversold?

This Could be a Buying Opportunity
I know, we’ve all said it before. Many of us jumped at Tesla’s stock when it announced a 3-for-1 stock split earlier this year. We jumped again when the stock fell below $200.00 per share. And now at $150.00 per share, is there any bottom in sight? Cathie Wood at Ark Invest seems to think so as the growth-oriented ETF continues to buy up shares of Tesla at these low levels. Wood has been a long-time Tesla bull but her reputation has certainly taken a hit over the past couple of years.

On Thursday, RBC analysts lowered the price target for Tesla’s stock from $325.00 to $225.00 per share, while still maintaining the Outperform rating. The analyst cited that there are numerous concerns about Tesla in the near term and the company anticipates that the EV maker will miss on fourth-quarter delivery estimates. RBC also believes that Tesla’s position as the top EV company will re-emerge in 2023 as supply chain issues ease and stronger consumer demand return.

So again: is Tesla Stock a Buy?
It depends on your patience level. Could Tesla fall further? Of course! If this bear market has taught us anything it’s that stocks will continue to have their price multiples contracted, especially as the Fed remains hawkish and focuses on reducing inflation. Investors need to understand that interest rates will continue to rise until inflation is back under control. This is not good for growth stocks like Tesla.

At the same time, the PEG ratio for Tesla is nearing 1.0 which is a classic indicator that the stock is either fairly valued or even undervalued compared to its future earnings. The price-to-sales ratio is at 7.2 and the PE ratio is at 28. Remember when these figures were in the triple digits? It shows how much Tesla’s stock has crumbled in recent months. The stock is trading about 30% lower than its 50-day moving average price of $198.10.

Unfortunately, until Musk’s infatuation with Twitter subsides, Tesla shareholders will continue to be quick to sell and hesitant to buy. I’ll be waiting to see how the company does in terms of December and Q4 deliveries before deciding what to do next.