Is It Time to Buy Tesla Stocks?

Like other Tesla car owners, I also wonder if the recent decline of the share is a strong indication to buy in. After all, TSLA stocks are currently trading at less than $200, while six months ago they were near $300.

Dropping oil prices are having a negative effect on the value of alternative technology and component providers. Tesla’s downhill slide since July 2015 is closely linked to the price of oil. Forbes’ Adam Hartung believes that shareholders need not worry and should be patient. He states three reasons in favor of buying Tesla stocks now:

1. Tesla builds extraordinary cars. Not just good electric vehicles, but excellent automobiles. That’s a fact.
2. The auto market is global and the price of gas is not affordable everywhere. In Paris or Munich, a gallon is still selling for about $5. In Hong Kong, we are looking at $8.50. Some states overly inflate sales taxes on luxury vehicles to reduce already dire pollution levels. A $100,000 fully equipped Mercedes E Class will in the end cost its buyer $200,000. But a $100,000 Tesla, costs $100,000.
3. Oil prices will not stay so low for long. Emerging countries and Europe are preparing economic recovery. The price war initiated by Saudi Arabia has significantly weakened the Kingdom. The «beautiful» harmony between OPEC countries could indeed break at any moment. The slightest, well placed spark could derail the apparent peace and lead to violent conflict. And this would rekindle the flame for a $50 oil barrel.

Among effective management styles, I like the “momentum” style. In this respect, news is rather encouraging. 15 out of 20 analysts recommend holding, buying or massively buying the stock. The emerging consensus around the target price is $280. Morgan Stanley sees TESLA reaching $450. A potential gain of 125%. Wow.

Alternatives for the risk-shy

If you have some fears and do not wish to see your savings melt at “ludicrous” speed in case of a further drop, you can expose your portfolio partially by opting for the Nasdaq index. Tesla’s market capitalization of 25 billion still earns it a nice 55th place in the 100 top stocks on the tech exchange. You can buy into the XQQ ETF that mirrors the performance of the index. The XQQ yielded 8.65% in the last 12 months. Being hedged against the effects of currency exchange rate volatility, the ETF did not take advantage of bonuses created by the fall of our dollar (CAD).

Personally, I prefer to see human factor involved in the balance. Just as with autonomous driving, I feel some discomfort letting algorithms decide everything for me. And this is the case with market indexes. Thus, one can fall back on great mutual funds (also available under private pools at reduced costs) that adjust to market weights, measure risk and increase liquidity if markets become too expensive.

Here are 3 interesting funds that own TSLA stocks:

• Dynamic Power American Growth, performance in 2015: 26.7%
• Fidelity Special Situations, performance in 2015: 8.98%
• TD Science & Technology, performance in 2015: 40.93%

This article is a translation of  : Est-ce temps d’acheter l’action de Tesla?

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Fabien Major

Fabien Major is a financial professional registered with the AMF and a financial columnist for the Journal de Montreal and the Journal de Quebecand Cogeco radio stations across Quebec. Fabien has a master’s degree in Business Administration and is the principal advisor for the asset management firm Major Private Wealth - Assante based in Outremont. Finance and technology enthusiast, he’s been blogging about these subjects for almost 10 years. A firm believer in the strong long-term potential of Tesla Motors, even more so since he purchases his own Tesla Model S.

DISCLAIMER: Opinions and comments expressed by Fabien Major in this column are his own and do not necessarily reflect those of this site’s management. His writings and comments are not intended as financial advice or as direct or indirect solicitation to subscribe to financial products or services.

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• Is It Time to Buy Tesla Stocks? - 02/02/2016