Updated: May 31
Author: Seren Kocaoglu
Date of Publication: 29/01/2023
Well, to answer this question, you had better make both a fundamental and technical analysis first.
What does Tesla do?
Tesla is an automobile company. Its main industries are electric cars, and it does the design, manufacture, and sales of EVs. It was founded in 2003 and it has been a leading company in the EVs market so far. The CEO of the company, Elon Musk, was the first person to invest in Tesla. In addition, Tesla is a public company traded on the NASDAQ stock exchange market under the name TSLA. In particular, TSLA became part of the S & P 500 in December 2020 and it was among the top 10 highest value companies until December 2022. However, after the last incidents, TSLA is no longer among the top 10 highest value companies in the S & P 500.
What happened? Why is Tesla no longer among the top 10 companies anymore?
As we all know, Covid-19 has affected the whole world in various ways, especially as there is still a great economic crisis going on. Most of the countries are facing the inflation problem, and they are increasing the interest rates to deal with inflation. Under those circumstances, it is normal to expect to be in a bearish period. However, as we can see in the chart, Tesla’s stocks are affected more than other stocks.
Apart from economic issues, we can list several reasons why Tesla’s stocks are falling:
1. The competition in the electric car market
Worldwide, it is obvious that Tesla is still the most powerful electric vehicle manufacturer. However, in some markets such as China, Tesla is no longer the largest electric vehicle manufacturer. Actually, the electric vehicle market seems to be an important market for automobile companies. Therefore, the competition in the EVs market is increasing day by day and with that Tesla has already started losing its power in some markets.
2. Acquisition of Twitter by Elon Musk
Elon Musk began buying Twitter shares in January 2022, and the acquisition process began in April and ended in October. During the acquisition, Elon Musk needed to pay $44 billion, and he funded this amount by selling his Tesla shares. Selling his Tesla shares caused other investors to sell their shares as well. Besides, he continued to sell his shares despite repeatedly saying that he is done with selling them. Therefore, this situation caused investors to not believe his words anymore and keep selling their shares.
3. Making discount in the cars’ prices & Demand Problem
As we mentioned above, the world is experiencing an economic crisis. There is high inflation all over the world and the authorities are raising interest rates. Under these circumstances, low demand in the EV market is also normal. In fact, Tesla has grown less than expected in 2022 and has announced rare sales. Especially after the acquisition of twitter, investors focused more on Tesla's financials, and it is quite predictable that they won’t invest in this company when they see rare sales. Also, Tesla offered a $3,750 discount at the beginning of December, and another discount offer ($7,500) came later. As seen with these offers, Tesla is trying to increase its sales. However, these discount offers can cause reverse psychology, causing buyers to expect more discount offers and not buy cars at the moment.
4. Fundamentally, is it a good time to buy Tesla?
After the facts we have stated, it seems that Tesla is not doing too good. We think that the company will have even more difficult days, especially due to the crisis, demand problem and competition. Therefore, we expect further declines in stock prices in the long term. As a result, in our opinion, it isn’t a good time to buy Tesla stock.
After doing the fundamental analysis, it would be better to support the ideas we stated with technical analysis as well. The chart below shows that there is a long-term downtrend, and the price broke the key support. In the short term, it can be expected to bounce towards the pink area($130-$140). Basically, we expect the price increase in the short term, next get rejected from the resistance and continue its downtrend.
To summarize our fundamental and technical analysis, we expect prices to decrease in the medium and long term, while we expect an increase in the short term.