Tesla Inc. has lately been in the limelight as the company has been the center of financial market discussions. Market enthusiasts are keenly observing the electric motor vehicle giant while it tests its significant support levels in the stock markets. Speculations are rife as this has given rise to the question – should one treat Tesla as a sturdy trade or a long-term investment? While the answer can be subjective varying based on individual perspectives, it is imperative to delve into the technical sticks supporting these assumptions.
Tesla’s recent market journey is one characterized by exceptional highs and lows. From April 2020 to January 2021, the company’s stock price remarkably rocketed from $100 to $900, adjusting to stock splits. Even though it rode on a high wave, this drastic surge was quickly plagued by concerns of over-valuation, leading to Tesla facing notable criticism from several market quarters.
At this juncture, market analysts began predicting a critical phase of correction for Tesla’s stock price. Evidently so, in the chart from the article referenced, Tesla’s stock price has seen a profound downtrend from a peak of approximately $900 to the present key support level of around $540-$550. This bearish movement stirred questions, is it an ideal time for a quick trade opportunity, or is it worth securing a long-term position in the expectation of future upside potential?
While interpreting the aforementioned scenario, it is crucial to consider Tesla’s RSI (Relative Strength Index). The RSI is an excellent tool to gauge the speed and change of a security’s price movements. RSI values range from 0 to 100. An RSI score of 70 and above indicates a stock is overbought or weak, whereas a score of 30 and below signals an oversold or strong stock.
Currently, Tesla’s RSI stands at around the mid 30s, which implies the stock is nearing an oversold state. This strongly suggests that the present downtrend movement in Tesla’s stock price might be approaching a saturation point and could potentially reverse to an upward trend shortly. Thus, it can be considered as a potential trade.
Nonetheless, to consider Tesla as an investment, other fundamental indicators are also critical. Tesla’s price-to-earnings (P/E) ratio, a significant measure of a company’s valuation, is significantly higher than the industry average, indicating that Tesla is overvalued in comparison. However, market analysts often tend to justify this premium valuation attributed to Tesla’s innovative technology, sustainable energy focus, a strong brand, significant market share, and steady sales growth.
Moreover, Tesla has been successful in delivering consistent revenue growth over the past years, one of the primary reasons why this company cannot be ruled out as a long-term investment, despite concerns of overvaluation. The company’s strategic plans of expanding into Asian markets, setting up world-class facilities in China, along with consistent innovation, and exploration of opportunities in the fields of autonomous vehicles and renewable energy, demonstrate a promising potential for future growth.
On the whole, it is evident that both short-term trades and long-term investments have their respective merits when dealing with Tesla’s stock. While short-term traders could be tempted by the current RSI levels, long-term investors bank on the firm’s future growth prospects and its revolutionary influence in the automotive industry. The diversity in perspectives is what makes the stock market an exciting arena. In the end, the choice between treating Tesla as a trade or an investment ultimately boils down to one’s risk tolerance, investment goals, and market outlook.