How To Tell When Tesla Has Finally Bottomed Out
Tesla is oh so tempting.
The stock is down 65%.
Yet it’s the world’s premier EV company.
EV sales are going to be setting records for years to come.
It’s still facing an order backlog of 90,000.
And it has true disruptive potential on the technology side too.
Tesla is one of the greatest “story stocks” of all time.
To buy Tesla now, however, carries a lot more risk than potential rewards based on one major event this week.
And if you understand why Tesla is still so risky, you will avoid these risks in the future and become a better and more successful investor.
Playing The Expectations Game...And Losing
We’ve been over many of the headwinds headed to the pure-play EV makers like Tesla.
There is increased competition.
There are rising electricity prices.
And the valuations they still have make their stocks extremely expensive.
Aside from all that, we saw one major event this week that shows Tesla still could have much further to fall.
Tesla started the week off with some disappointing news.
The company announced 405,000 deliveries for the last quarter of 2022, just below expectations of 418,000.
The news caused an analyst at JP Morgan to reduce the price target for Tesla and reiterate its “underweight” rating on the stock.
Here’s the key though.
Even though Tesla’s shares were already down 60%+, the news sent Tesla’s shares down another 13% on the day.
That’s the big warning sign right there.
When Less Bad Is Good
Now, all this action is normal stock behavior.
Tesla released some disappointing news and the stock went down.
Again, totally normal.
The problem is that this is the action of a stock that hasn’t hit bottom yet.
The best way to know a stock has hit bottom is when it releases bad news and the stock is flat or even up a little bit.
That’s how you know expectations have gone from too high to too low.
And when expectations are too low is the best time to buy a stock because even OK news can send it higher and good news could catapult far higher.
Tesla doesn’t appear to have hit that point yet.
When it does though, Tesla could be a big time buy again.
