Will Tesla’s recent fall mark a turning point for the stock?

Posted on June 21, 2022 by Zachary Visconti

As Tesla’s stock faces recent falls, many investors fear overshooting the downside amidst pullbacks affecting the larger market. Still yet, some investors believe Tesla’s stock is near a new bottom, saying that it could mark a turning point for its trajectory.

Above: Tesla's shares seen on a smartphone. Photo: Sulpicio Helps / Unsplash

Growth stocks like Tesla may be starting to bottom out with recent falls, despite an extremely loyal base of investors and the overall economic downturn, according to Forbes. Tesla’s stock is down over 40 percent from its highest peak at the time of writing, so many investors remaining bullish on the stock’s long-term outlook see this as a chance to buy on a budget.

To Forbes, the capitulation of Tesla’s stock combined with its investor base being so loyal seems to indicate that the tech growth stock could be starting to bottom. With all that Tesla CEO Elon Musk has going on, however, some question if Musk is as focused on the electric automaker as he could be. Beyond that, increasing competition will continue to challenge Tesla in years to come as legacy automakers like Ford and General Motors continue to pump out electric vehicles at increasing rates.

Still, it’s recommendable to any investor to proceed with caution — especially with growth stocks like Tesla that may have less stability than traditional names. Forbes notes that every successful Tesla has dozens of companies like it that fail. Using data from Factset and Bloomberg, Forbes found that more than 40 percent of stocks included in the Russell 3000 suffered falls of 70 percent or more without ever recovering.

This risk remains, even for stocks like Tesla which command entire industries. And the automotive industry is unique, making the math around Tesla’s valuation difficult to follow. Either way, it’s worth noting that not every tech company that peaked in the last year are a buy.

Above: CNBC's Jim Cramer discusses Tesla. YouTube: CNBC

While temptations to comparing the current tech sector to the dot com bubble in the late 1990s remain, given collapsing tech valuations, Forbes says it’s actually wrong. While some of these companies saw incredible upward growth, some without even having products or businesses, the technology landscape of today is different — their businesses are sound and have a lot of potential to generate revenue, at the very least.

Tesla remains a hot commodity among the investor community despite a fairly high price, with many still considering it to have a lot of long-term value across markets. From electric cars to energy to insurance to a future of self-driving taxis and humanoid robots, Tesla has more than a few potential markets to back up its buy price.

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Source: Forbes / CNBC

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