Tesla’s Stock: A Look at the Decline Post-Trump Bump

What a wild ride it has been for Tesla (TSLA) investors. After initially benefiting from a surge dubbed the “Trump bump,” it seems that the electric vehicle (EV) manufacturer is now grappling with a significant selloff triggered by dismal sales data from China. We’re talking about a spectacular tumble of more than 50% in monthly EV sales just last month. So, what does this mean for savvy trend-following traders looking to capitalize on this fading momentum? Let’s dive deep!

The Numbers Don’t Lie

As of Monday, Tesla’s stock plunged an eye-watering 15%, closing at $213.65—the lowest point since October 23, 2024. Just to put this into perspective, this marked the company’s largest one-day drop since early September 2020. For those keeping track, this latest downturn extends an already painful streak: Tesla has endured eight consecutive weeks of losses, a record-setting slough for the stock.

This downturn has effectively erased all the gains made since Election Day last November, where shares closed at $251.44. At their peak on December 17, 2024, Tesla shares reached a dizzying high of $479.86, inflating the company’s market cap by a staggering $734.73 billion. Now, the math gets rather grim: Tesla has shed approximately $55.55 billion from its valuation following Trump’s victory, while CEO Elon Musk has seen his wealth plummet by nearly $7.09 billion. Ouch.

Bad News Across the Board

So, what’s driving this selloff? Let’s start with the news from China. According to the China Passenger Car Association, Tesla saw a catastrophic 51.5% decline in sales, dropping from 63,238 units in January to just 30,688 in February. Comparatively, the competition isn’t floundering; BYD, a fellow EV manufacturer, experienced a 7.3% jump in sales, totaling 318,233 units. This stark contrast signals that Tesla is losing its foothold in the world’s largest EV market.

The woes don’t end there. European markets are also turning sour, with Tesla sales in Germany plummeting 76% in February alone—building on declines of 60% and 45% in January for Germany and Europe, respectively. Investor sentiment is likely reeling from the implications of Musk’s controversial political affiliations that have sparked trade tensions, further complicating Tesla’s market position.

Analysts’ Predictions: A Gloomy Outlook

UBS analyst Joseph Spak is also ringing alarm bells, lowering his price target for Tesla’s stock from $259 to $225. He has slashed first-quarter delivery expectations, now predicting just 367,000 EV deliveries instead of the previously anticipated 437,000. This shift implies a year-on-year decline of 5% and a staggering 26% drop from fourth-quarter deliveries. Such downgraded expectations further amplify the challenging landscape Tesla faces.

Yet, there remains a glimmer of hope amid the chaos. Spak points out that Tesla’s long-term vision is shifting towards AI, a realm encompassing robo-taxis and humanoid robots. While these innovations could serve as game-changers, it’s critical to underline that current stock valuations may already reflect these futuristic prospects. The market may not be as enthused as it once was about Tesla when earnings reports loom and EV delivery numbers disappoint.

Trading Implications: What Should Traders Do?

Given the tumultuous conditions surrounding Tesla, trend-following traders need to remain agile. Here are actionable insights you can use:

• Watch Key Support Levels: Keep an eye on critical support near $200. If this level holds, it may present an opportunity for a rebound. However, a break below could signal further downside.
• Monitor Market Sentiment: Given the negative sales reports, stay attuned to overall market sentiment. Look out for any changes that may signal a potential reversal in Tesla’s trajectory.
• Consider Short Positions: With the negative outlook from analysts and decreasing sales figures, those with a more risk-tolerant approach may consider shorting the stock, especially in light of any further disappointing news that could trigger additional sell-offs.
• Keep an Eye on Competitors: With competitors like BYD gaining ground, it’s crucial to assess how Tesla positions itself against the competition as the market dynamics shift.

Conclusion

In conclusion, Tesla’s recent downturn driven by alarming sales figures and a shifting political climate has stirred the pot for traders looking for momentum plays. While the long-term vision remains intriguing, the current landscape is rife with challenges, shaping an environment that requires vigilant trading strategies. Keep a close watch on those charts and stay ahead of the trend!