Here’s why Tesla (TSLA) stock price could crash to $500
Tesla (NASDAQ:TSLA) stock price is in trouble. The shares have tumbled more than 40% from their high this year, taking its market capitalization to more than $802 million. They fell more than 4% in premarket trading, bringing Elon Musk’s net worth to around $227 billion. He lost $42 billion this year.
Why is TSLA collapsing?
There are several reasons why Tesla stock price has been on a strong downtrend over the past few months. First, the selloff is part of the overall weakness in other stocks given that all indices like the S&P 500 and Nasdaq 100 have all fallen more than 10% this year.
Are you looking for fast news, tips and market analysis? Sign up for the Invezz newsletter today.
Second, there are fears that the world will experience a sharp downturn this year, which will affect most businesses. In a letter to executives, Musk warned he felt terrible about the economy. As a result, he warned that the company could soon lay off around 10% of its workers.
Third, Tesla’s stock price fell due to Musk’s distraction with his plan to acquire Twitter in a $4 billion deal. Analysts think Musk could be distracted since he already runs three companies: Tesla, Boring Company and SpaceX.
Fourth, the current crisis in Ukraine has helped drive the cost of electric vehicle materials much higher, with nickel hitting multi-year highs. The cost of other things like salaries and other raw materials. As a result, the company was forced to raise its prices.
Finally, Tesla’s stock price crashed on valuation metrics. At its peak, it was valued at over $1 trillion, which was a higher valuation than the rest of the automakers combined. Now, with its growth slowing, investors are assigning a different multiple to the stock. Additionally, electric vehicles have become a commodity, with other automakers like Toyota, VW, and GM unveiling their EV products.
Tesla stock price prediction
Turning to the daily chart, we see that Tesla stock price has been on a strong downtrend over the past few months. Closer examination shows that it has formed a descending triple top pattern which is shown in black. In price action analysis, this pattern is usually extremely bearish.
At the same time, Tesla formed a death cross, which occurs when the 50- and 200-day moving averages cross. Therefore, I expect Tesla stock price to likely have a bearish breakout at $500.
Where to buy now
To invest simply and easily, users need a low-cost broker with a reputation for reliability. The following brokers are highly rated, recognized worldwide and safe to use:
- Etoro, trusted by over 13 million users worldwide. Register here >
- Capital.com, simple, easy to use and regulated. Register here >
*Investment in crypto-assets is not regulated in some EU countries and the UK. No consumer protection. Your capital is in danger.
