Tesla Inc. TSLA shares have been locked in a lackluster phase this year but it has rewarded its investors well in the past.
What Ails Tesla Stock: Tesla has shed about 49% in the year-to-date period, underperforming the S&P 500 and the Nasdaq Composite indices. These two averages are down about 17% and 30%, respectively, this year.
CEO Elon Musk’s decision to buy Twitter has worried both retail and institutional investors as well as analysts. Musk's divided attention to his electric vehicle business and the need to sell more of his Tesla stake are among the concerns raised.
Morgan Stanley analyst Adam Jonas’ survey showed that about three-fourths of institutional investors blamed the Twitter situation for at least a significant portion of the recent underperformance of Tesla’s stock.
See Also: Tesla Analyst Says Risk-Reward On The Stock Is More Balanced Now But…
Investors are also jittery about the wheels coming off Tesla’s China growth story. The COVID-19 situation in China has posed both supply and production side challenges for Tesla. To make matters worse, demand for its EVs has been slowing. To counter the weakness, Tesla announced a price cut in China in late October and raised insurance incentives in November.
Tesla’s Historic Returns In December: Tesla offered its shares to the public in late-June 2010. So, we have 12 years of back data to gauge how the stock typically fares in the final month of the year.
- 2021: -7.69%
- 2020: +20.68%
- 2019: +26.77%
- 2018: -5.05%
- 2017: +0.83%
- 2016: +12.83%
- 2015: +4.23%
- 2014: -9.02%
- 2013: +18.14%
- 2012: +0.44%
- 2011: -12.84%
- 2010: -24.58%
The debut year more often reflects moderating sentiment following a post-initial public offering exuberance. Excluding 2010, the average historical return of Tesla stock in December is roughly 4.5%.
How 2022 Returns May Pan Out: An investment of $1,000 in Tesla at the Nov. 29 price of $180.83 will fetch about 5.5 Tesla shares. Assuming stock returns are in line with historical trends, it could trade around $189 by the end of the year.
The $1,000 investment, therefore, would grow, to around $1,040.
This time around, the dynamics are different. As an optimist, one can argue, the year-end buying, technically called the “Santa Claus rally" could prove healthy for stocks, especially the beaten-down ones. Tesla, being one, could benefit disproportionately.
The equation isn’t that simple. There are a host of variables for which visibility is limited. Extraneous to Tesla, the non-farm payrolls report for November due on Friday, the November consumer price inflation report and the December 13-14 Federal Open Market Committee meeting could all have their say on the broader market and, in turn, Tesla.
Then there is the COVID-19 situation in China. If the signal from the Communist regime is that the “zero COVID” policy is here to stay, it could upset even the well-thought plans of companies. So far, Tesla hasn’t disclosed any production hit despite companies such as Apple Inc. AAPL warning of shortages.
Finally, Musk has to clear up the Twitter mess and in turn its impact on sentiment toward Tesla stock.
Price Action: Tesla closed Tuesday’s session at $180.83, down 1.14%, according to Benzinga Pro data.
Read Next: How To Invest In Tesla (TSLA) Stock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
