The recent drop and bounce back in Tesla’s stock price has investors wondering if now is the time to buy the electric vehicle maker’s shares.
Tesla’s stock fell sharply last Thursday, dropping 12% to $182.63 after the company reported lower-than-expected fourth quarter earnings. This marked the lowest closing price for Tesla since late May 2022. However, the stock rebounded slightly on Friday, rising 0.34% to close at $183.25.
The sell-off came as Tesla reported earnings and revenue that missed Wall Street forecasts. The company delivered 405,000 vehicles in the fourth quarter, below expectations of about 418,000 vehicles. Tesla also projected fewer deliveries in 2023 than analysts had predicted, forecasting 1.8 million vehicles versus expectations of 2 million.
The disappointing results raised concerns among investors about slowing demand as Tesla faces growing competition in the EV market. High interest rates and the potential for an economic downturn also weighed on sentiment.
However, some long-term Tesla investors see the sharp pullback as a buying opportunity. An analysis of a multi-year technical chart shows that despite the recent decline, Tesla stock has remained in a long-term uptrend.
The chart, which dates back to early 2020, indicates that each time Tesla’s stock has crashed and formed a long lower-wick candlestick to reach the trendline, it has subsequently bounced back strongly. The long lower wick indicates rejection of lower prices. This suggests that while the downtrend may persist in the near-term, long-term support around the $180 level could spark the next leg higher.
Tesla bulls point to the company’s industry-leading position in electric vehicles, its pace of innovation, and its potential for continued growth globally. The recent price cuts on Tesla’s vehicles also position the company to boost demand and expand market share. Tesla aims to grow deliveries by about 37% in 2023, reaching 1.8 million vehicles.
However, analysts caution that Tesla faces decelerating growth in the coming quarters without major catalysts on the horizon. The earliest catalysts – first quarter delivery figures in April and potential updates on new models or factories – are still months away. This means Tesla’s stock price could remain under pressure in the near-term.
Following Tesla’s earnings miss, several analysts reduced their price targets for the stock. But the new average analyst price target of $222 still represents over 20% upside from current levels. This suggests many on Wall Street see long-term value in Tesla shares despite the recent volatility.
For investors considering buying Tesla’s stock on the dip, the key question is whether Tesla’s growth story remains intact. The company faces increasing competition, especially in China which comprises about a quarter of its sales. High valuation is also a concern, with Tesla trading around 45 times forward earnings even after the steep sell-off.
But with Tesla still leading the EV revolution and expanding into new markets, many investors likely view the recent weakness as a buying opportunity. While turbulence could persist in the coming months absent positive catalysts, the long-term bull case still appears strong for those willing to stomach the volatility.
