This article covers a breaking news development: Tesla recall due to braking flaw.
Tesla has initiated a recall of roughly 53,000 Model S and Model X cars according to a report from CNET. As the report says:
Stock Price Leading Up to Tesla Recall
It’s been a good year to be a Tesla shareholder. Year-to-date, the stock has risen from $215 per share at the start of January to over $300 per share in the month of April. In the past few weeks, Tesla has gained a larger market capitalization than both GM and Ford. This CNN Money Report takes a closer look at how Tesla is now worth more than both GM and Ford — by billions of dollars. It remains to be seen whether the Tesla recall will initiate a correction in the stock price.
According to an article from (The Street), Barclays analyst Brian Johnson has a rationale for why shares of the zero-emissions automaker have risen so dramatically recently.
Interestingly, despite the upbeat note, Johnson reiterated his underweight rating on Tesla — the equivalent of sell — and $165 price target, which projects a 44% crash in the stock.
This is what happens when stock price movements do not reflect the underlying fundamentals of a business. Investors, mostly retail investors, buy the stock because they like the company, there has been positive news, and the overall market has been going up. Yet what many of them do not realize is that the stock is already priced for world domination.
Even if Tesla was able to take over the world in both automobiles and energy, its current shareholders would never receive an adequate risk-adjusted return on their investment.
Tesla Stock Rating
This is the reason The Stock Trader Blog has Tesla on the Bearish List When there is no safety net or any sort of rational valuation metrics on a stock, the risk of losing capital due to idiosyncratic news events increases dramatically. As long as short sellers are patient, I believe they will eventually make a handsome return by shorting this company.
Tesla is an inspiring company, but its stock price is a great example of market inefficiency.