A well-known stock market adage is: “Never catch a falling knife.” Tesla (WKN: A1CX3T)-Shares increasing, because they have been falling continuously since November 2021.
But what is behind the saying? It comes from the technical analysis of price movements and suggests that falling prices often continue. Therefore, according to the interpretation, investors should first wait for a so-called bottoming out.
Fundamental Reasons for the Tesla Stock Price Decline
However, it would be better to focus primarily on the fundamental developments to concentrate. Again, wisdom could come into play here. There are currently reports that have contributed to the collapse in prices.
On the one hand, there is the deteriorating economic environment. With high inflation, costs are rising for all car companies, which means that profit margins are falling. Financing costs also increase with higher interest rates. However, inflation also reduces consumer spending. Tesla is now feeling this for the first time in its history, as the group is slowly developing into a mass car manufacturer.
In China, for example, he recently throttled production and launched sales-promoting measures to increase sales. In December 2022, Tesla again increased the discounts in the USA for the Model 3 and Y to 7,500 US dollars.
Hiring freeze, high electricity prices and Twitter takeover
Despite its expansion, Tesla is now reporting a temporary hiring freeze and is likely even conducting layoffs starting in the first quarter of 2023. Elon Musk considered a 10% job cut as early as June 2022. Already in the summer he had “a very bad feeling” about future economic developments.
In Europe, car experts also fear lower e-car sales in the coming year. The reason is the high electricity prices, so that the previous competitive advantage has almost disappeared. A purchase is less worthwhile in the long run.
Another reason for the fall in price is the numerous Tesla share sales by Elon Musk. He held his stake for many years without working it down. Many investors lose confidence and sell with him. The company boss has secured loans for the Twitter acquisition with Tesla stock and could be forced to sell.
Foolishes Tesla-Fazit
However, reports of the fall in the price of Tesla shares are currently often being exaggerated. Cyclical stocks fall more and more in crises and the overall market has also fallen significantly since November 2021.
At the moment it might be appropriate to wait for better news. This is how stock market wisdom could be put to good use. At the height of the crisis, Tesla stocks are again a long-term opportunity.
The item Tesla stock: “Never grab a falling knife”? appeared first on The Motley Fool Deutschland.
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Christof Welzel does not own any of the shares mentioned. The Motley Fool owns and recommends stocks on Tesla.
Motley Fool Deutschland 2022