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Over the years, EV maker Tesla ((TSLA - Free Report) ) has evolved into a dynamic technology innovator. With the world’s richest man at the helm (Elon Musk), Tesla has gone from an obscure start-up to the EV king. Tesla has transformed the EV space like Amazon ((AMZN - Free Report) ), changed the retail landscape, and Netflix ((NFLX - Free Report) ) revolutionized entertainment. In fact, roughly 70% of battery-powered electric car sales in the United States are courtesy of Tesla. However, for four straight quarters, TSLA stock has plummeted after reporting earnings, and the stock is more than 50% off its all-time high of $414.50, which was achieved in 2021. Is it time to give up on Tesla, or is the most recent dip an opportunity for bargain hunters?
Historical Data Tells us that Crisis Equates to Opportunity
Jason Goepfert (@jasongoepfert on X) ran historical price data on Tesla and made a significant discovery: “Every time Tesla gapped down 5% or more to a 6-month low, it rebounded strongly over the next 30 days. 100%-win rate, 18% (!) median return.” Thursday, Tesla gapped down more than 5% to 6-month lows. Will history repeat?
Valuation is at Rock-Bottom Lows
Tesla’s price-to-book ratio of 12.19 (calculated by taking total assets – liabilities, preferred stock, and intangible assets) is at its lowest level since early 2020. The last time TSLA’s p/b was this low, TSLA exploded from $35 to more than $400 per share.
Image Source: Zacks Investment Research
Competition is Fading
Pure-EV competitors to Tesla are collapsing. For example, Nio ((NIO - Free Report) ),Rivian ((RIVN - Free Report) ), and Lucid ((LCID - Free Report) ) are more than 90% off their all-time highs.
China Stimulus
Earlier this week, news broke that China is planning to unveil a massive stimulus package to boost the country’s struggling economy. In addition, the People’s Bank of China (PBOC) will allow banks to hold smaller cash reserves. Should the stimulus effort be successful, it will be a big boost for Tesla, whose second-largest market is China.
Record Cash on Hand
Tesla is turning into a cash cow with nearly $30 billion cash on hand. With so much dry powder, Tesla’s board has the flexibility to buy back shares of TSLA or inject more cash into the business to ramp up production.
Image Source: Zacks Investment Research
Bottom Line
As Tesla faces a stock decline for four consecutive quarters, recent data suggests a potential opportunity for investors. Historical analysis reveals that every time Tesla experienced a 5% or more gap down to a 6-month low, shares roared back in the next 30 days. Finally, an attractive valuation and cash hoard bode well for the EV king.
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Tesla: 5 Reasons the Earnings Dip is a Bargain
Over the years, EV maker Tesla ((TSLA - Free Report) ) has evolved into a dynamic technology innovator. With the world’s richest man at the helm (Elon Musk), Tesla has gone from an obscure start-up to the EV king. Tesla has transformed the EV space like Amazon ((AMZN - Free Report) ), changed the retail landscape, and Netflix ((NFLX - Free Report) ) revolutionized entertainment. In fact, roughly 70% of battery-powered electric car sales in the United States are courtesy of Tesla. However, for four straight quarters, TSLA stock has plummeted after reporting earnings, and the stock is more than 50% off its all-time high of $414.50, which was achieved in 2021. Is it time to give up on Tesla, or is the most recent dip an opportunity for bargain hunters?
Historical Data Tells us that Crisis Equates to Opportunity
Jason Goepfert (@jasongoepfert on X) ran historical price data on Tesla and made a significant discovery: “Every time Tesla gapped down 5% or more to a 6-month low, it rebounded strongly over the next 30 days. 100%-win rate, 18% (!) median return.” Thursday, Tesla gapped down more than 5% to 6-month lows. Will history repeat?
Valuation is at Rock-Bottom Lows
Tesla’s price-to-book ratio of 12.19 (calculated by taking total assets – liabilities, preferred stock, and intangible assets) is at its lowest level since early 2020. The last time TSLA’s p/b was this low, TSLA exploded from $35 to more than $400 per share.
Image Source: Zacks Investment Research
Competition is Fading
Pure-EV competitors to Tesla are collapsing. For example, Nio ((NIO - Free Report) ), Rivian ((RIVN - Free Report) ), and Lucid ((LCID - Free Report) ) are more than 90% off their all-time highs.
China Stimulus
Earlier this week, news broke that China is planning to unveil a massive stimulus package to boost the country’s struggling economy. In addition, the People’s Bank of China (PBOC) will allow banks to hold smaller cash reserves. Should the stimulus effort be successful, it will be a big boost for Tesla, whose second-largest market is China.
Record Cash on Hand
Tesla is turning into a cash cow with nearly $30 billion cash on hand. With so much dry powder, Tesla’s board has the flexibility to buy back shares of TSLA or inject more cash into the business to ramp up production.
Image Source: Zacks Investment Research
Bottom Line
As Tesla faces a stock decline for four consecutive quarters, recent data suggests a potential opportunity for investors. Historical analysis reveals that every time Tesla experienced a 5% or more gap down to a 6-month low, shares roared back in the next 30 days. Finally, an attractive valuation and cash hoard bode well for the EV king.