Tesla (NASDAQ:TSLA) is still in the red for 2024, but don’t think now’s the time to scoop up Tesla stock, ahead of a possible further recovery during the back half 2024. The current investor excitement about the EV maker’s shares may not last. Demand and profitability issues persist. These factors may become a key focus for TSLA soon.
In fact, bearishness for Tesla could resume far sooner than you may think. Although that’s not to say that a tremendous tumble is just around the corner, after making outsized gains on positive news, the next spate of negative news could mean an outsized pullback ahead for shares.
Two Reasons Why Tesla Stock is Running Hot
Summer may be a slow season for Wall Street, but this month, it appears investors are gearing up for big gains ahead with TSLA. Since late May, shares have gained by 12%. The reasons for this rally are twofold.
First, investors reacted positively to news of shareholder approval of CEO Elon Musk’s controversial $56 billion compensation package. For most companies, news of such massive executive compensation would spark a sell-off. However, in the case of TSLA stock, a positive reaction makes sense.
There have been concerns that, if Musk were unable to command his desired compensation, he would exit the CEO role at Tesla, or at the very least shift his AI-related endeavors toward one of his other companies.
Tesla’s perceived value is derived largely by both Musk’s presence in the CEO role, as well as the perception that Tesla is as much of an AI and robotics company as it is an EV company.
Second, as Wedbush’s Dan Ives recently pointed out, the market is anticipating promising news to come out at the company’s planned “robotaxi day” event on Aug. 8. This event could entail the company unveiling its latest progress in the field of autonomous driving.
Why Shares Could Soon Cool for the Summer
Although Tesla stock appears to be gearing up for a season of big gains, we argue that there’s a strong chance that shares quickly cool for the summer, pulling back as soon as the start of next month.
That’s when the company is scheduled to reveal its Q2 2024 delivery numbers. As Al Root from Barron’s recently argued, it’s possible that Wall Street’s expectations for the preceding quarter are too high.
While the street is expecting Tesla deliveries to fall just 4% year-over-year, more downbeat forecasts are calling for declines in the 11% range.
If this plays out, it’s possible that investors quickly forget about Tesla’s self-driving and AI potential, and circle back to its still-unresolved issues with what is, at least for now, the company’s primary business.
Even if the market shrugs it off, and the rally persists through July, come August a sell-off may commence.
In line with Ives’ take, investors may indeed be buying up TSLA ahead of “robotaxi day,” but what if this event results in a “buy the rumor, sell the news” scenario? If too many investors decide to take profit right after Aug. 8, the stock could begin reversing course.
The Verdict: No Need to Hit the Accelerator Right Now
Market participants may buy into the latest “hope and hype” regarding TSLA, but in time they could regret putting their foot on the accelerator so aggressively.
With shares trading for nearly 78 times earnings, and the company’s core business continuing to face material headwinds, what Tesla and Elon Musk are trying to pull off right now is nothing short of a high-wire act. One false move, and shares could experience severe price declines.
Weighing that against the remote chances that Musk reveals something truly groundbreaking on Aug. 8, such as the unveiling of full-on self-driving capability, the risk/return proposition does not appear favorable.
Hence, when it comes to Tesla stock, consider hitting the brakes, while you still can.
Tesla stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.