Since the start of the coronavirus pandemic in 2020, the rollback buybacks of automaker Tesla have brought good returns to their investors. During each dip, Musk’s shares recovered quickly, keeping traders in the black every time. But today, when the problems in the global economy have only worsened, and the possibility of a recession is constantly being discussed in the markets, it is very difficult to calculate the benefit from buying Tesla shares.
The reaction of market players clearly shows that at the moment the automaker has overtaken the crisis. The company’s shares fell in price by almost 40%, which is twice as much as in the case of the S&P 500 index. Last trading week, the shares finished trading at $650.28. In this article, we will analyze the state of affairs of the company and find out whether it is worth investing in it right now.
What was the turning point?
Tesla’s paper price decline began immediately after its CEO Elon Musk publicly announced his desire to buy Twitter social network two months ago. Then the announced price of the agreement shocked many market players – $ 43 billion. The automaker’s stockholders didn’t appreciate the billionaire’s idea at all. They decided that the businessman could not manage SpaceX, Tesla and Twitter at the same time.
In addition, Musk wanted to use a share of Tesla’s shares to secure loans in an agreement with the social network. Now he has abandoned these plans.
Cloud over Tesla
The macroeconomic conditions observed in the market today have developed in an unfavorable way for large corporations like Tesla. There are several factors that indicate the occurrence of a recession for securities with a low probability of recovery:
- rise in price of raw materials;
- supply chain issues;
- pause in Chinese production.
Market sentiment is extremely negative today, as evidenced by the cold attitude of investors to the company’s 3:1 split of securities. To understand the full scale of the problem, it is worth remembering that in 2020, the news about the split procedure increased Tesla shares by 60%.
What do experts say about Tesla shares?
Despite the current situation, many market experts believe that the fall in the price of the company’s securities is a great opportunity to enter the deal, and will play into the hands in the long run. At the same time, RBC’s specialists raised the rating of the automaker’s shares from “in line with the market” to “outperforming the market”. They also believe that in the future, Tesla can protect itself from competitors with investments in logistics. At the same time, representatives of this analytical company reduced the target price of the company’s shares by $75, to $1,100 per unit.
UBC also changed its assessment of Musk’s shares from neutral to buy. At the same time, they kept their price target at $1,100 per unit. UBC experts “bet” on the company’s manufacturability, and its leadership in the field of introducing innovative technologies into cars.
The American bank Morgan Stanley agrees with RBC’s definition of “above the market” for the automaker’s shares. They say that it’s not worth refusing to invest in Tesla even after the publication of Elon Musk’s letter to the company’s employees about difficult times. The experts of this financial institution believe in the ability of the corporation to restore quotes by increasing supplies.
What is the result?
After the biggest drop in quotes, many traders still consider Tesla papers attractive. The thing is that the company significantly outperforms its competitors in terms of the pace of introducing artificial intelligence technologies into products and more than once managed to prove the ability to grow supply volumes no matter what. Most experts agree that the company’s shares should be bought to receive benefits in the long term. One way or another, it is worth keeping an eye on the market, which can turn around in a few seconds.
