Tesla May Melt Down To ~$90 As Fundamentals Tank And Bitcoin Correlation Flips

Summary:

  • Tesla, Inc.’s selloff is expected to continue, as the company is facing headwinds such as a downturn in the EV market and increased competition from Chinese manufacturers.
  • On top of fundamental weakness, I highlight that for the first time since COVID, Tesla stock correlation with risk-on sentiment has turned negative.
  • The correlation flip is a major bearish inflection and suggests that Tesla has finally lost the benefit of optimistic investor perception, which shielded shares from negativity in the past.
  • Without the positive sentiment that carried Tesla’s sky-high valuation for multiple years, the stock could be vulnerable for a sharp rerating, potentially trading down to the valuation of a typical GARP asset.
  • I view a ~$90/ share as reasonable, projecting an EV/EBIT of around ~30x. This would be a valuation similar to the price multiple seen in Microsoft and Nvidia shares.

stock market crash sell-off red finance numbers

bunhill

My Fundamental View On Tesla Remains Bearish …

Heading into 2024, I argued strongly that the selloff in Tesla, Inc. (NASDAQ:TSLA) shares was set to accelerate, as I pointed out multiple fundamental headwinds for the world’s


Analyst’s Disclosure: I/we have a beneficial short position in the shares of TSLA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not financial advice

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