Is it time to buy Tesla shares?

Markets are expected to bounce back this morning on the wake of Donald Trump pushing a payroll tax cut to combat the Coronavirus effects on the US economy. With markets looking strong, Tesla is expected to open at $661 (9:07 am EST), a 8.72% increase according to the pre-markets. The recent news on the Coronavirus spreading across Europe and Iran has left investors unsure on whether to buy more stock or to hold until we are in the clear with the virus being successfully contained. Tesla has been one of those stocks that has been hard to value, as it is fundamentally overvalued however has extreme investor backing which has inflated the stock 4 fold over the past 3 months.

Will Tesla bounce back to $900 in the coming months?

From what we have seen over the past 3 months, Tesla stock has had some serious investor backing making it one of the biggest movers on the NASDAQ this year. It would be foolish to look back on the past 3 months to predict it’s future movements as one: we were operating in a Bullish market. Two: We have no way in knowing how much the Coronavirus will impact Tesla’s production in China until more data is released over the next 3 months. So instead of me telling you that we don’t know, instead I’ll show you exactly what we do know.

Bearish impact

  • We know that the COVID-19 and the current oil price battle between Saudi Arabia and Russia are effecting the current stock price (Systematic Risk)
  • According to CNBC research, when Crude Oil prices decline EV stocks generally lose value (Short run loss)
  • Tesla’s Bull case has been seriously impacted by a global slowdown
  • Share price is fundamentally overvalued with some investors cashing in now
  • Musk admitted that the market was pushing the price too high anyway

So if we know Tesla was an overvalued stock, when is it time to buy?

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.

At $600 there has been some support by the market. On Friday, we may see Tesla fall again as investors are staying away from holding short term stocks over the weekend as news on the virus remains uncertain. As an investor, if Tesla fell underneath $600 I would personally see that as a long term opportunity however this holds considerable short term risk. If you are willing to buy Tesla above $600 for short term gain, it is unlikely to reap of much benefit (opinion from research). Yes I believe Tesla is a great company, and what they are doing will impact the world for many years to come, but from an investors perspective we are still unsure on what the market will bring. To mitigate risk, a cheap entry point over the next few weeks may prove a great hold however you must be willing to understand that your fundamental research won’t have any impact on Tesla’s performance. Tesla is really a one off company that many people see as a long term hold, which makes it a dangerous player in years to come.

Here is our free, uncomplicated, and extensive ASX portfolio

You can subscribe to us for free via email and get updates when we post new articles. From all of us at YIG, thank you for the support.

The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Written  by Tyger Fitzpatrick, Founder of Youth Investment Group

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.