Tesla stock (NASDAQ: TSLA) is experiencing a sharp correction. Although both retail investors and analysts were bullish in the closing months of 2024, owing to Chief Executive Officer (CEO) Elon Musk’s close relationship with Donald Trump and a promising quarterly report in Q3 2024, those hopes have failed to materialize.
The carmaker’s latest earnings report, covering Q4 2024, was a dud — both earnings per share (EPS) and revenues missed estimates. With some $0.6 billion in unrealized gains from Bitcoin (BTC) investments, the actual EPS provided by core operations missed the mark by quite a significant margin.
January also marked the first-ever year-over-year (YoY) decline in vehicle deliveries. All the while, company insiders have intensified their selling of Tesla stock.
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Musk’s political stances have done little to endear him to Tesla’s customer base. Since Trump assumed the presidency, TSLA stock has lost 47.6% in value.
At press time, a single TSLA share was worth $224.58, having marked a 44.39% loss on a year-to-date (YTD) basis.
An additional bearish factor came into play on March 11, when a key technical indicator reached its lowest level in a year.
Tesla stock oversold — buy the dip or abandon ship?
TSLA’s relative strength index (RSI), a key technical indicator measuring the magnitude of price moves, has moved below 30 for the first time in a year. At the time of writing, the RSI of Tesla stock stood at 22.
An RSI below 30 indicates oversold conditions — at 22, Tesla stock is currently deeply oversold. While extremely high or low RSI levels do correlate with reversals, there’s reason to believe that that won’t be the case this time around.
For one, we have to factor in macro conditions. With a budding trade war between the United States and the rest of the world, markets have begun to enact a selloff of risky assets.
As a company with an extremely high valuation — most of which, it should be noted, is essentially speculative, as investors are banking on Tesla successfully securing leadership in several emerging and highly-competitive fields like autonomous driving and robotics, TSLA is more vulnerable on this front than the average equity.
While far from a unanimous shift, quite a few leading Wall Street firms have slashed their price targets for Tesla stock as of late. The electric vehicle (EV) maker is vulnerable to the same risks that other tech companies are, with several additional, unique risk factors. At least until wider market conditions improve, readers should exercise patience and caution.
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