Tesla shares (ticker: TSLA) have been a hot topic in recent weeks. The stock has been on a wild ride, rising about 50% in just five weeks following an EV charging deal with Ford Motor (F) and Nvidia’s (NVDA) impressive first-quarter results. Though Tesla’s gains have been impressive, it hasn’t been without its fair share of downgrades.
Four of the top banks on Wall Street – Barclays, Morgan Stanley, DZ Bank, and Goldman Sachs – downgraded the stock last week, citing concerns over valuations. The analysts’ consensus was that Tesla stock had climbed too far, too fast and was due for a correction.
Despite these downgrades, Tesla shares have continued to rise. Yesterday, the stock was up another 3% while the S&P 500 and Nasdaq Composite both saw modest gains. Notably, Tesla’s rise was particularly impressive given there was no major news catalyst driving the surge.
At around $277 per share, Tesla is sitting well above the average price target of $208 a share. While some investors view Tesla as an AI play, not everyone on Wall Street is convinced that it can sustain its current valuation. Nevertheless, the stock seems to have taken on a life of its own, with many investors bucking the analyst consensus.
As we’ve seen time and time again, trading in Tesla stock is always wild – and right now, that wild ride seems to be on an upward trajectory.
The Tesla Rollercoaster: Analyzing Volatility
The stock price target for Tesla has become a source of concern for stock analysts. Analyst’s rating of buy shares of the company have decreased from 65% to 40% in 2023. In the beginning of 2023, the average analyst target price was $255, while the stock was at $125. This growth rate is unusual for most companies. The uncertainty regarding Elon Musk’s use of Tesla stock to fund his Twitter purchase made investors skeptical. As a result, the shares fell by more than 40% in 2023.
Volatility is not only an issue for traders but also presents a problem for Wall Street. While it may cause unnecessary panic, investors should not buy and sell stocks with every change in stock prices.
Gary Black, the Future Fund Active ETF co-founder, and a portfolio manager stressed that investors need to take into account two types of Wall Street downgrades – the downgrade on fundamentals and the downgrade on price. He is himself a shareholder of Tesla.
Traders, however, do not mind volatile stock prices. Goldman Sachs’ downgrade of Tesla was viewed as a valuable opportunity to make profit by one trader.
In conclusion, Tesla’s volatility makes its stock price an unpredictable rollercoaster ride for both traders and Wall Street. Investors must decide if they want to wait and hold their shares or sell them at a lower price.
