After suffering its worst day ever on the stock market, the Tesla faithful appear poised to try and help the company’s share price begin it a new climb.
The company, which split its stock 5-for-1 on Aug. 31, has seen its stock price fall steadily since hitting a high of $502.49 on the day it split. Although the price has fallen steadily during the nearly 10 days since then, the fall yesterday was substantively different.
Tesla stock closed Tuesday at $330.21, down more than 20% from the previous day. That decline continued into after-hours trading where the price dipped as low as $310.36. However, some Tesla fans – or “long” holders – are looking to rally the price, as the stock opened the day at $356.60 on Wednesday.
It briefly reached a high of $364.99 before retreating into the low-$350 range in morning trading. The tech sector, which is where most of SoftBank’s moves were focused, has been on the decline during the past few weeks, is also on the rebound Wednesday.
Tesla’s decline was shocking to some because the EV maker had been enjoying a long run of nothing but positive news. It was helping – although not the sole reason – drive the stock price ever higher, culminating in aforementioned stock split last month. However, critics and some industry analysts were dumbfounded by the run up past $2,400 per share just before the split. It seemed unlikely.
Then at least one reason came to light: Japan’s SoftBank and its moves to manipulate the price of a slew of tech stocks, including Tesla. When the news came to light that the enthusiasm for Tesla stock may have been artificially induced, it began to fall.
SoftBank’s interference ended up costing the EV maker as spot in the S&P 500 – something many Tesla fans have pointed to as a signal that the world now sees Tesla as a viable enterprise and not a fluke company run by a charismatic, but occasionally petulant billionaire.
The rise gave the company a market capitalization of $450 billion, making it twice as valuable as Toyota, but the decline has seen the market cap fall to $307.7 billion as its low in overnight trading last night. It’s now in the $332-billion range. Toyota is at about $210.8 billion.
Complicating the matter is the fact that SoftBank has been very involved in the EV section, in terms of investments, pumping billions into deals with General Motors’ Cruise autonomous vehicle unit, Toyota, Honda, Rivian and more.
Tesla vehicle sales held up substantially better than had been feared, especially after the overall automotive market was hammered by the coronavirus pandemic. Sales in China began to boom with the late 2019 opening of Tesla’s second assembly plant in Shanghai. Demand in Europe also was solid. And, in the home U.S. market, Tesla overwhelmed all EV competitors combined, with its Models 3, Y and X the top-selling EVs during the first half of the year.
After years of running up billions of dollars in losses, meanwhile, Tesla finally revealed four consecutive quarterly profits with its second-quarter results solidly in the black even as traditional automakers struggled due to the pandemic.
But there were concerns to be found even in that black ink, skeptics stressed, noting that Tesla’s second-quarter profit was based all but entirely on the sale of zero-emissions credits to rival manufacturers, rather than from vehicles like the new Model Y.
So far, no new entry has been able to loosen Tesla’s grip on the sales charts in the U.S., but with so many entries, such as the VW ID.4 and Ford Mustang Mach-E, coming, it may be a matter of time.
But not everyone is worried. CFRA Research, for one, has upped its target price for Tesla to $475 a share, while now rating it Buy, reversing its previous Sell advice. “We think TSLA’s risk/reward is now skewed to the upside and importantly, the stock’s YTD run-up has greatly reduced its cost of capital and helped strengthen its balance sheet,” the research firm said in an advisory note to investors.
Who is right may take time to sort out. CEO Musk has frequently taunted short-sellers, and while Tesla’s stock may have slipped, it is still positioned significantly higher than it was at the beginning of this year.
Paul A. Eisenstein contributed to this report.