Tesla Stock Declines As Traders Sell Shares Of Richly Valued Companies
Shares of Tesla found themselves under strong pressure amid strong sell-off in equity markets. The stock has already bounced back from the $850 level to the $900 level, but it remains well below the previous close near the $944 level.
The reason for this sell-off is the continuation of the move out of high-PE stocks on fears over rising rates. S&P 500 is down by more than 10% from all-time high levels, while the tech-heavy Nasdaq has already lost more than 15% of its value.
What’s Next For Tesla Stock?
Analyst estimates for Tesla earnings continue to move higher. Currently, analysts expect that Tesla will report earnings of $9.04 per share in 2022, so the stock is trading at almost 100 forward P/E.
It should be noted that earnings estimates for 2022 have improved by as much as 16% in the last three months, which explains why the market is still able to tolerate the sky-high valuation despite the huge sell-off in the high-PE segment.
However, Tesla is not immune to market trends, and its stock is down by roughly 25% from the highs that were reached back at the beginning of this year. It remains to be seen whether speculative traders will rush to buy Tesla shares after the recent sell-off. The company remains richly valued, and if the market remains focused on risks, high-PE stocks will continue to suffer.
It should be noted that Tesla will release its fourth-quarter report on January 26, after market close. Thus, traders will soon get more data on the company. In case the report exceeds analyst expectations, and Tesla’s guidance is optimistic, the stock may break the current downside trend despite the global move out of riskier assets.
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