Catalysts have pros and cons, and disappointing production growth or sales in China could push the stock market in the other direction, and not every new development has to be positive.
On February 15, Tesla's stock price rose by 5.33%, can the stock price continue to rise? This can be tough. Recently, the antagonism between Fed Chairman Jerome Powell and Russian President Vladimir Putin has left the stock market in trouble.
The rise in stock prices does require a new catalyst, and there are several potential candidates to consider.
Tesla's share price on Feb. 15 was higher than the previous day's high, which is good news for bulls.
Tesla's stock price fluctuated around in early 2022 and fell most of the time. Strong fourth-quarter delivery data, as well as stronger-than-expected earnings in January, were not enough to drive Tesla shares higher. Concerns about rising interest rates overshadowed any positive impact the stock might have seen from its strong operating performance.
Higher-valued growth stocks hurt more than other stocks. Fast-growing companies derive most of their revenue and cash flow from the distant future. As interest rates have risen, these incomes and cash are less valuable today after discounting.
Interest rates have always been a headwind. The same is true of the potential conflict between Russia and Ukraine. Tesla shares fell 7 percent from daily highs to lows after news broke that U.S. and British officials advised citizens to leave Ukraine as soon as possible.
Investors should go all out and be prepared for volatility.
There is some potential good news coming soon. Dan Ives, an analyst at Wedbush, noted to Barron's that "after Austin receives final certification, Tesla will be able to start delivering the Model Y in March." Tesla will ramp up production at two new plants in 2022: one in Germany and one in Austin, Texas.
Ives also believes that China's sales data will be positive for Tesla stock. China is the world's largest market for new and electric vehicles. Last December, Tesla produced a record number of cars at its Shanghai plant. But compared to December last year, Sales of electric vehicles in China fell in January. EV sales are expected to slow somewhat as the government reduces incentives for EV purchases at the end of 2021.
The third catalyst that Ives thinks is the news about Tesla's 4680 battery. These larger batteries have the potential to reduce car costs and increase vehicle range. This catalyst may arrive in the second half of 2022.
Finally, an uncertain factor for Tesla and the auto industry will be the fate of President Biden's federal purchase tax credit for electric vehicles. It was part of the "Rebuild better infrastructure" bill, but it didn't pass. Investors will have to wait and see what Biden plans for next.
Ives is a Tesla bull who gives Tesla a Buy rating. He is looking for a positive catalyst. Of course, catalysts have pros and cons, and disappointing production growth or sales in China could push the stock market in the other direction, and not every new development has to be positive. Tesla, for example, is facing more competition from automakers in the United States.
At present, the U.S. auto industry has been able to sell every electric car it produces, so investors are only worried about Tesla's production at the moment. But one day, investors will have to worry about matching production and demand. However, EV market saturation should not be a negative catalyst for any EV-related stocks in the coming years.
Text | Al Root, a writer for Barron's
Edit | Wu Yuting
Copyright Notice:
Original barronschina articles, not reproduced without permission. For the English version, see "Tesla Stock Needs to Break Free From Putin and Powell."
(This article is for your informational purposes only and does not constitute the provision or reliance of investment, accounting, legal or tax advice.) ）
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