Now is a good time for long-term investors to take a closer look at their growth portfolios. Many high-flying tech stocks, after an incredible run last year, are struggling right now as investors prefer cyclical companies whose stocks have more upside as the prospects for reopening the economy brighten.
Among growth stocks, Tesla (NASDAQ 🙂 is one of the most watched names. Fueled by increasing demand for its electric cars, improving the profitability and success of its operations in China, the Palo Alto, California-based carmaker's shares gained more than 740% last year, making it the world's leading carmaker. best performance on the.
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Elon Musk, the founder and chief executive officer, became the world's richest person in January, before Amazon's (NASDAQ 🙂 Jeff Bezos retook the title.
But so far TSLA's performance this year has not been impressive. The stock is down more than 7%. Perhaps worse, if someone bought this name on January 26, when the stock was at its peak closing at $ 883.09, the losses have been close to 30% since the start of the year.
Nevertheless, the stock has a history of boom-and-bust cycles. If you are a buy and hold investor, chances are you will still see quite a bit of profit on your position. In the past five years, the Tesla share has increased by more than 1,300%. It closed at $ 654.87 on Friday.
Even after this brief bearish period, some of Tesla's most bullish analysts remain loyal. They will continue to see hefty gains in the coming years.
$ 3-Trillion Company
Among those who prefer Tesla stock is Cathie Wood, whose ARL Invest Management has a strong stake in Tesla. According to the fund's latest note, TSLA could reach $ 3,000 by 2025, giving the company a valuation of nearly $ 3 trillion.
There is a 50% chance that Tesla will drive fully autonomously within five years, which means the company should rapidly scale up its planned robot taxi service, according to a report posted on ARK's website on Friday. ARK is also optimistic about Tesla's insurance company, which collects highly detailed driving data. The unit could expand its offering in other regions and benefit the company from its better-than-average margins.
Of course anyone can guess whether Tesla stocks will reach that level. But the general market consensus is that now is not a good time to buy Tesla stock. On Friday, a report emerged that regulators in China plan to ban Tesla vehicles from military installations and housing complexes out of concern that the cameras onboard the vehicles could be used to collect sensitive data for the company.
Likewise, Tesla is the group's least-valued share of megacap growth stocks, said a recent post on TheStreet.com, which includes Apple (NASDAQ 🙂 and Microsoft (NASDAQ :), with only 38% approval on Wall Street. And when it comes to a price target, analysts predict an average loss of 14% on Tesla stock.
In addition to this bearish tone, there are also growing concerns that the EV market isn't going to be that easy. drive for Tesla, as many of the stock bulls believe. Traditional automakers, such as Volkswagen (DE 🙂 AG (OTC 🙂 and General Motors (NYSE 🙂 are accelerating their EV efforts.
VW's stock got a big boost this month as some analysts became optimistic about electric vehicle ambitions. In a recent note, UBS Group analysts praised VW's first mass market model built on a dedicated EV platform, the ID.3 hatchback. The car is “the most credible EV effort to date from any old car company,” wrote Patrick Hummel, raising his stock price target.
Bottom Line
There are many factors that slightly tarnish the brilliance of Tesla stock after a striking year. The continuation of such a powerful run is highly unlikely as investors shun growth stocks in favor of cyclical stocks.
In addition, as competition in the EV market increases, we must urge caution. We think there will be a better entry point in the coming days for those looking to play the Tesla trade and keep this stock in their long-term portfolios.
