Investors Should Consider The Pros And Cons Before Buying Tesla’s Stock In The Recent Stock Sell
The recent tech stock sell-off is picking up steam. After reaching a high of 16,212 points last year, the Nasdaq Composite has fallen by more than 12% to 14,149 points .
The market correction going on over the past several months has spared no company, not even Tesla. The investor darling has lost more than a quarter of its all-time-high market capitalization since early November.
With Tesla’s stock price down, some investors are wondering if they should take this opportunity to load up on shares. But should they? Let us explore further by looking at the pros and cons of buying Tesla’s stock right now.
Image source: Getty Images.
What Should I Do With My Tesla Stock Sell Buy Or Hold
As a shareholder of Tesla only since 2H2018, I wanted to share my thoughts on whether to buy, sell, or keep holding Tesla stock. The share price has risen meteorically. Since reaching a record-high, it has since corrected by 30%+. Personally, Im holding on and buying more!
I bought Tesla stock in 2H2018 after I met Elon Musk at a wedding. At the time, there was all type of media hoopla about him being unstable, smoking marijuana on Joe Rogan, sending out missive Tweets, and so forth.
I wanted to see for myself whether Elon was indeed unstable, or a stable genius. In the end, I decided he was the latter. The media was blowing things way out of proportion. I bought 300 shares in multiple tranches between $280 $310.
The stock did well and then started to plummet in 2019. When it recovered to the $400 $420 level, I decided to sell half my shares and lock in a 30% gain. At the time, I felt good because I was down about 30% at one point. In retrospect, selling was a mistake.
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Tesla Is Electrifying Returns
Tesla also has had an excellent track record of producing large returns for shareholders. Moreover, this has increased over the years. Looking at the companys return on assets, equity, and capital employed, theres clearly a distinction to be made. In fact, Elon Musks company outperforms many of its car peers by massive margins.
Data source: YCharts
Pair this with its immaculate balance sheet and the stock looks even more attractive. With very little debt, the auto manufacturer has more than sufficient capital to weather a global recession.
Data source: YCharts
Whats more, the conglomerate is continuing to grow its market share in the car market, which goes to show how well its doing despite the tough economic environment. In a world thats becoming increasingly electric, Tesla is well positioned to capitalise.
Analysts rate the stock a moderate buy with an average price target of $294. Ill be looking to buy more of its shares when Ive got more spare cash on hand.
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.
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Diversify Your Investments Into Real Estate
Stocks are very volatile compared to real estate. And Tesla stock is especially volatile. Therefore, if you want to dampen volatility and build wealth at the same time, invest in real estate. Real estate is my favorite asset class to build wealth.
The combination of rising rents and rising capital values is a very powerful wealth-builder. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.
Is Tesla Stock A Good Buy
Traditionally, I dont do buy/sell on stocks. Its a slippery area, but when folks show up in my comments and email asking over and over again for the same thing, I at least consider it.
Tesla and Bitcoin
Im writing about Tesla stock today, because I wrote about Bitcoin 20,000 last week .
Bitcoin and Tesla might sound unrelated, but their performance and trajectory as late are very similar.
Bitcoin is a revolutionary idea in currency that is so new there is no real way to know how it will react or behave in the long term. Recently, however, all the naysayers have found themselves on the wrong end of a huge, unprecedented run-up in the price of bitcoin based largely on a belief that its future is certain.
Tesla too is a revolutionary car company that can no doubt be thanks for advancing the electric car industry much more quickly than any traditional automaker in the past decade.
Its stock price has also ramped up in a way that suggests those buying and holding the stock are convinced there is no question that Tesla and its products are the leaders of the future. Plus, the S& P 500 just added Tesla stock to its popular stock index. Analysts standing in the way with warnings about Teslas stock are quickly mowed down by accelerating price increases.
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Decide Your Order Type And Place It
Once youve decided how much you want to invest in Tesla, you can buy your first shares. Youll need to log into your brokerage account and enter Teslas ticker symbol and the number of shares you want to buy or the dollar amount you want to invest.
You can use a simple market order to buy shares at their current price, or you can try a more sophisticated order type, like limit or stop, to purchase TSLA only if its price falls below a certain threshold.
Because Tesla is traded on the Nasdaq exchange, you can buy it Monday through Friday from 9:30 a.m. until 4:00 p.m. ET. If your brokerage provides access to pre-market and after-market trading, you can continue to place orders for a few hours before or after the market is open. Any orders received outside of hours you can trade during will be placed as soon as the exchange opens again.
Tesla Stock Price Down 138% On Tuesday
The Tesla stock price fell by -1.38% on the last day from $181.35 to $178.85. It has now fallen 3 days in a row. During the last trading day the stock fluctuated 4.75% from a day low at $175.33 to a day high of $183.65. The price has been going up and down for this period, and there has been a 6.44% gain for the last 2 weeks. Volume has increased on the last day by 1 million shares but on falling prices. This may be an early warning and the risk will be increased slightly over the next couple of days. In total, 82 million shares were bought and sold for approximately $14.72 billion.
Here’show to buy TSLA stockif you’re new to investing.
The stock lies in the middle of a very wide and falling trend in the short term and further fall within the trend is signaled. Given the current short-term trend, the stock is expected to fall -41.49% during the next 3 months and, with a 90% probability hold a price between $85.67 and $112.34 at the end of this 3-month period. Do note, that if the stock price manages to stay at current levels or higher, our prediction target will start to change positively over the next few days as the conditions for the current predictions will be broken.
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Dow Jones Leaders: Apple Microsoft
Among Dow Jones stocks, Apple shares sold off 4.7% Thursday, falling to its lowest level since Nov. 9. The stock is around 25% off its 52-week high. Apple stock traded up 0.3% Friday.
Microsoft ended a three-day win streak Thursday, falling 3.2%. This week, the stock found resistance at its long-term, 200-day line. The software giant remains about 28% off its 52-week high. Microsoft shares declined 0.1% early Friday.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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Dow Jones Drops 200 Points After Stock Market Plunge Meta Jumps On Upgrade
- 09:39 AM ET 12/16/2022
The Dow Jones Industrial Average dropped more than 200 points Friday morning, as the major stock indexes threatened to deepen Thursday’s stock market plunge.
Early Friday, the manufacturing and services Purchasing Managers’ Indexes are due out at 9:45 a.m. ET. The manufacturing PMI is expected to remain in a contraction at 47.8. Meanwhile, the services PMI also remains in contraction mode, with a 46.5 reading.
Adobe and Darden Restaurants were earnings movers Friday morning. Adobe stock rallied more than 5% in morning trade after the company topped Wall Street’s earnings target. Revenue met views for its fiscal fourth quarter. The company’s own outlook came in mixed, with current-quarter revenue forecasts slightly below expectations.
Darden shares dived more than 6% despite the company’s better-than-expected results for its fiscal second quarter.
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Time To Lock In Some Gains
The big problem with Tesla, and one that investors should really think about closely, is valuation. There is a number of ways to look at this, but the one that is probably the most shocking is . Tesla’s market cap is roughly $1.1 trillion, compared to Ford’s $77 billion and General Motors’ $89 billion. That’s shocking because, going back to the sales numbers above, Tesla sold less than a quarter of the cars that Ford or GM sold in the third quarter. How could it possibly be worth more than 10 times as much as each of those two companies? Even with all the opportunities it has for growth in the years ahead, a lot of good news is clearly being priced into Tesla’s stock today.
Investors who have ridden the stock up should probably think about taking some money off the table. In fact, in the past year alone the stock price has doubled. And that includes the recent volatility surrounding Elon Musk’s stock sales. This isn’t to suggest that you have to sell every share you own, but prudence hints that locking in some gains makes sense. Perhaps you can use the cash to add some diversification to your portfolio, which may be a little extra heavy on Tesla given its huge 1,200% gain since January of 2020.
Decide Whether You Should Buy Tesla Stock
One of the key tenets of investing is diversification, which means spreading your money around among many different investments a variety of companies, industries and geographical locations, as well as investments that aren’t tied to the stock market, like bonds or real estate. This is the dont put all of your eggs in one basket rule you may have heard.
If you dont have a diversified portfolio yet, one of the easiest ways to get there is by investing in mutual or index funds rather than individual stocks. Funds essentially bundle stocks together to lessen the chances that youll lose your entire investment if a single company tanks.
If you do already have a diversified portfolio, you’ll want to consider how Tesla fits into that ask yourself how much you’re already exposed to EV stocks, or simply to stocks in general. A strong portfolio has a healthy mix of stocks and bonds, though the exact asset allocation depends on your goals, timeline and risk tolerance.
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Decide How Many Contracts You Want
Each call or put option that you purchase of a particular stock is issued with a contract for 100 shares of stock. Depending on your budget and how you feel about a companys prospects, you can decide the number of contracts you want to buy. You can also consult a broker or a financial advisor to help you decide.
What To Do Now
Tuesday’s market action shows why investors shouldn’t buy right at the open, especially when the major indexes gap up on news. It also shows why investors need to keep their emotions in check.
If the market rallies strongly on Wednesday’s Fed rate hike and Fed chief Powell’s comments, there will likely be some buying opportunities. But add exposure gradually, using early entries and pullbacks for slightly safer entries.
Until the market rally shifts from choppy action to sustained uptrend, it’s risky to ramp up exposure.
A lot of stocks from a variety of sectors are setting up. So you want to be prepared, working on your watchlists. Stay engaged so you can act as stocks clear buy points.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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Cons Of Buying Tesla Stock
As you checkup on Tesla stock, remember that the Tesla stock discussion is not 100% positive. Tesla has issues of its own from its planned factory in Wolfsburg to reliability and Elon Musks public persona that could turn out to be a little less than positive.
- Teslas infamous CEO Elon Musk has a reputation for being eccentric. From twisted tweets to risky relationships, Musks questionable actions have a direct impact on Teslas stock value. It comes as no surprise that a supervising board has been appointed to monitor Musks behavior.
- Teslas daily stock value has been volatile to say the least.
- Tesla stocks do not pay dividends to its investors.
- Tesla vehicles have been hit with accusations that they are unreliable, unsafe, poorly built, etc. While its difficult to sus out the complexities of a modern vehicle and the technology behind it, stock prices tend to rise and fall with the news cycle.
Is Tesla Stock Undervalued Or Overvalued
Valuing Tesla stock is incredibly difficult, and any metric has to be viewed as part of a bigger picture of Tesla’s overall performance. However, analysts commonly use some key metrics to help gauge the value of a stock.
Tesla’s P/E ratio
Tesla’s current share price divided by its per-share earnings over a 12-month period gives a “trailing price/earnings ratio” of roughly 50x. In other words, Tesla shares trade at around 50x recent earnings.
That’s relatively high compared to, say, the trailing 12-month P/E ratio for the NASDAQ 100 at the end of 2019 . The high P/E ratio could mean that investors are optimistic about the outlook for the shares or simply that they’re over-valued.
Tesla’s PEG ratio
Tesla’s “price/earnings-to-growth ratio” can be calculated by dividing its P/E ratio by its growth to give 1.463. A low ratio can be interpreted as meaning the shares offer better value, while a higher ratio can be interpreted as meaning the shares offer worse value.
The PEG ratio provides a broader view than just the P/E ratio, as it gives more insight into Tesla’s future profitability. By accounting for growth, it could also help you if you’re comparing the share prices of multiple high-growth companies.
Tesla’s EBITDA
Tesla’s EBITDA is $16 billion.
The EBITDA is a measure of a Tesla’s overall financial performance and is widely used to measure a its profitability.
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What Is Your Sentiment On Tsla
150.08
Over the month, Tesla shares have slipped from a high of around $195 to a low of just over $156 but the stock rose in trading yesterday to $157.67 with after-hours trading hitting $158.45.
And Marketbeat shows that of 35 analysts currently covering Tesla, 19 rate the stock a buy 11 a hold and 5 a sell.
Clearly there are more bullish than bearish on the EV maker with a consensus price target of $264.91.
However, the five rating the stock a sell indicate the degree of confusion and wariness in relation to Musks decision making and his business priorities.
The belief that Musk’ is a visionary with a Midas touch is one that has less resonance now after Tesla shares have taken a pounding and the Twitter takeover he tried to squirm out of.
But perhaps what investors are focussing on is Tesla cars are indeed a strong product in a market that is likely to see continued growth over coming years. All the noise does not change the marketability of the vehicles.
On that score, brokers might be right in seeing Tesla as good value at current levels.
How To Buy Teslastock On Stash
Stash allows you to purchase smaller, more affordable pieces of investments rather than the whole share, which can be significantly more expensive.
Teslaâs share price is determined by its bid-ask spread, which is the difference between the price that buyers are willing to pay and the price that sellers are willing to accept. Teslaâs price can fluctuate throughout the course of each trading dayâwhen you buy Tesla through Stash, we execute the market order during our next available trading window . At Stash, we donât recommend trying to predict the market when buying investments. We believe it can be a better strategy to buy quality investments you believe in, then hang onto them.
Use our historic performance chart to see real-time Teslastock price and the Tesla news feed to help further your research before investing in fractional shares with any dollar amount you choose.
Stash offers two subscription plans: Stash Growth and Stash+.
Each plan can help you reach different goals and offers a unique combination of financial accounts and features. All plans include access to a personal brokerage accountâalso known as your personal investment account. You can use your Stash personal portfolio to purchase any of the available investments on our platform, as well as access our suite of automatic saving and investing tools.Learn more about Stash pricing.
Once your market order of Tesla stock is complete, you’ll officially be a shareholder of Tesla!
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