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Tesla’s Stocks and Volatility: A Perplexing Situation


Tesla’s stocks are no stranger to a wild ride. Recently, they went up by 1.7% in early trading on Tuesday. Meanwhile, S&P 500 and Nasdaq Composite demonstrated increases of around 0.5% and 0.6%, respectively.

But this time, the big news is what didn’t happen: the stock didn’t get downgraded. That means a lot since Tesla was downgraded four times in four days by Barclays, Morgan Stanley, DZ Bank, and Goldman Sachs leading to this point.

These downgrades were due to high valuation. Tesla, like Nvidia, is viewed as an AI play by some investors. Following an EV charging deal with Ford Motor (F) and Nvidia’s (NVDA) blowout first-quarter results, Tesla’s stock rose by about 50% in just five weeks from $183 to $277.

Adding the equivalent of a Toyota Motor (TM) and a General Motors (GM) in its market value, Wall Street just couldn’t keep up. At $277, Tesla stock was roughly $75 beyond the average analyst price target.

Today, the average analyst target price is about $208 a share which is still $36 below where the shares are currently trading. It is typical for S&P 500 that the average analyst price target is around 10-15% above where a stock trades.

Tesla’s Volatility Problem

Tesla has experienced a significant drop in the number of analysts rating its shares as Buy, with only 40% doing so, down from 65% early this year. The average target price by analysts at the start of 2023 was $255 per share, but the Tesla stock was trading at $125 per share.

The company’s stock was exceptionally weak towards the tail-end of 2023; investors seemed skeptical about CEO Elon Musk’s use of Tesla stock to fund his purchase of Twitter. Shares fell over 40% between late October and year-end.

Although volatility in the stock market is not unusual for traders, Wall Street has a harder time coping with it. As such, investors are curious about what they should do with all the volatility in the market.

“There are two types of Wall Street downgrades: downgrades on fundamentals and downgrades on price,” indicates Future Fund Active ETF co-founder Gary Black. He is a shareholder and portfolio manager for Tesla and emphasizes that traders should primarily pay attention to fundamentals.

Traders are less perturbed by volatility and perceive Goldman Sachs’ most recent downgrade as an opportunity. One trader referred to it as a “gift.”

Tesla’s price target situation is perplexing to many investors; continued volatility has complicated how investors approach stock trading in the company.

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