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Matein Khalid
Tesla (TSLA) was a fairytale in 2020 when it soared 740% after which 50% in 2021. The fairytale has morphed right into a nightmare in 2022, with the shares down 52% from their January highs of 402 to 168 as I write. What went flawed?
One, 2022 has been an annus horribilis for NASDAQ, which is down 32% YTD. Since Tesla has a inventory market beta of 1.50, traders shouldn’t be shocked whether it is down 50% as that is its historic correlation and volatility relative to the index. This drop has been a catastrophe for Elon Musk because it has price his web value to vaporize by $200 billion. Unquestionably the mom of all monetary ache factors for the South African cyborg who will at some point teleport the human race to outer house.
Two, excessive rates of interest/inflation improve the borrowing prices of shopping for a luxurious automobile for shoppers similtaneously their disposable incomes plummet in actual phrases. So all EV shares have gotten slammed and Tesla isn’t any exception. The EV enterprise will get much more aggressive as auto colossi like Common Motors, Volkswagen and Toyota ramp up their EV choices. It isn’t precisely coincidental that GM, VW and Toyota shares have all enormously outperformed TSLA up to now six months, a situation that might have been heresy again within the Stone Age circa 2020.
Three, arithmetic of discounted future money flows hits all progress shares with excessive valuation metrics when the Fed turns ugly and rates of interest spike larger. TSLA trades at 34 occasions ahead earnings, so I’d not be shocked to see it commerce right down to 120. The issue with progress shares is that their market cap might be slashed by 50% as has occurred to TSLA, but they discover no help from worth funds as they’re nonetheless thought of means too costly. TSLA was the quintessential progress inventory in 2019 to 2021 and now should pay the value for this.
4, EV demand in China has clearly plummeted as a result of property meltdown, collapse in financial progress, draconian covid lockdowns and epic falls on the Shanghai/Shenzhen inventory change, particularly for Chinese language tech shares. That is the rationale NIO is down 70% in 2022 and TSLA has not been unscathed by the drop in Chinese language demand and logistics/provide chain disruptions within the Shanghai giga manufacturing facility.
5, Musk has grossly overpaid for Twitter and needed to promote $19 billion in Tesla shares, not precisely a vote of confidence for TSLA. Discover that he has hardly tweeted in any respect on TSLA (SEC?), eradicating one other supply of hype and froth.
Six, TSLA charts scream promote to me because it has misplaced its momentum and violated important help ranges. This pet was as soon as a Doberman Pinscher however is now simply one other NASDAQ canine headed south.
Seven, I simply don’t see any main product launches that can transfer the needle and thus TSLA on the horizon and reverse its present bearish channel. My technique now could be to attend till the shares decline within the mid-140s after which start to design possibility methods the place my worst case situation is to take supply of TSLA at 120 to 125.
Additionally revealed on Medium.
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