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Company is up 98.24% year-to-date.
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Impressive rally is facing a number of headwinds.
Tesla has been defying both gravitational and company fundamental forces,
lately.
Shares continued their multi-week running streak, closing at their highest
since October 2022. Tesla has only rallied for a longer period once before
in its history, back in January 2021.
The company is up a whopping 55% in the last month and a half alone,
reaching $235 a share.
If we extrapolate that unsustainable rate, the company’s stock will hit a
jaw-dropping $1500 before the year-end.
Hence, a pullback is not only expected but necessary and healthy.
On top of that, the company’s closing price was $234.86 is
way above Wallstreet’s 12-month target of $192.56,
representing a whopping $43 a share premium to what the consensus view
among analysts covering the stock estimate to be its fundamental price.
Not to mention the bleak macro-outlook, which worsens with each passing
day, yesterday, the eurozone officially entered recession territory, and
the US is on the verge of one.
Inflation may have come down, but at 4.9% year-over-year, it’s far from the
Fed’s target. The central bank will continue hiking until it reaches 2%.
Fed Chair Powell has repeatedly stressed that he did not see any rate cuts
this year. All that increases the probability of the hard-landing scenario
and, with it, Tesla tumbling down.
High inflation has negatively affected Tesla’s growth figures, as the
company is certainly not recession-proof. It’s visible that since the rate
hikes began last year, Tesla’s sales growth rate has plummeted, from 87% in
Q4’2021 to 34% in Q1’2023, dipping way below the 50% growth rate Mr. Musk
has aimed at.
Tesla’s insanely high premium with an eye-watering Price to earnings ratio
of 69 is given due to the growth narrative; if the company fails to deliver
on it as it has been lately, so should its price correct to the downside.
Right now, the market is hoping that Tesla’s growth story does not
encounter a flat tire. However, the road ahead is quite bumpy, and
investors should be cautious.
Active Investors could consider shorting Tesla with our
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