March 28, 2024

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Dip in Tesla Is an Opportunity for Smart Investors

12 min read


a car parked on the side of a building: Tesla Super Charging station on Stockdale Hwy and the 5 fwy. Tesla Supercharger stations allow Tesla cars to be fast-charged at the network within an hour.


© Source: Sheila Fitzgerald / Shutterstock.com
Tesla Super Charging station on Stockdale Hwy and the 5 fwy. Tesla Supercharger stations allow Tesla cars to be fast-charged at the network within an hour.

With its inclusion on the storied S&P 500 Index, shares of electric-vehicle pioneer Tesla (NASDAQ:TSLA) dipped a bit. But don’t worry. There’s plenty of juice behind Tesla stock.



a car parked in a parking lot: Tesla Super Charging station on Stockdale Hwy and the 5 fwy. Tesla Supercharger stations allow Tesla cars to be fast-charged at the network within an hour.


© Provided by InvestorPlace
Tesla Super Charging station on Stockdale Hwy and the 5 fwy. Tesla Supercharger stations allow Tesla cars to be fast-charged at the network within an hour.

Tesla stock soared during 2020. Shares were bid even higher prior to the S&P 500 inclusion date of Dec. 21. As a result, a wobble was not unexpected. Several observers told investors to watch for the retreat and be ready to buy TSLA at a better price.

There’s plenty of juice behind Tesla stock. Like that little drum-playing bunny, this is a stock that could keep going – and going.

A Look at Tesla Stock

Market historians will note a couple of things about 2020. Of course, the first will be the novel coronavirus. The second could be Elon Musk and his first-mover electric vehicle company. Tesla established a beach head in the electric-vehicle segment and stormed ahead to lead both in the United States and China.

Musk, the company’s founder, ignored the critics and naysayers. In the process, he built a game-changing car company from nothing.

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Critics are drawn to Musk like moths to a stadium light. Sometimes, reality intrudes and the critics find they were wrong. As the critics criticize and the short-sellers take their positions, Tesla stock continues its persistent climb – even accounting for volatility’s roller-coaster ride along the way.

Let’s survey the landscape on the inclusion date, Dec. 21. Tesla stock was trading around $654 that afternoon, which represented a decline of about $40 per share. That price came on the heels of its 52-week high of $695, which was reached the day before. Yes, the day before. I suppose that was the S&P 500 rally.

Here’s the interesting thing. Tesla stock’s 52-week low is $70.10. As you can see, TSLA is up some 600% year-to-date.

So, on Dec. 21, Tesla’s market cap was $619.67 billion. And it’s price-to-earnings ratio was 1,294.22.

Gallery: 9 Best Stocks to Buy for the Santa Claus Rally (InvestorPlace)

More Than a Car Company

If you know Tesla by its cool cars and SUVs, that’s OK, but there’s more to know.

The company is pushing the envelope of solar power and power storage technologies just as it is pushing the automobile industry.

As my InvestorPlace colleague Matt McCall wrote recently, “Tesla is simply much more than a binary bet on the future of EVs.” He says skeptics don’t recognize the company’s long-term potential.

“The long-term bull case is still rock solid, so any dip, pullback or sell-off represents a golden opportunity,” McCall says.

Keep or Sell Tesla Shares?

Now that Tesla stock reached new highs, that age-old stock market debate resumes in earnest. Sell and cash in or stay and buy more at the dip? In other words, should I stay or should I go?

The answer is short and sweet: it depends.

Really, it depends on the type of investor. An investor who is playing market swings would surely be tempted to take profit if those shares were bought at a comparatively lower price. But the buy-and-hold investor will smile at the stock’s increase over the course of a dismal year. That investor won’t sell. No, that investor will resist the temptation and enjoy the ride.

The Bottom Line

Tesla is a remarkable company and its stock posted a very impressive 2020. As impressive as it was, there is no reason to believe that the saga of Tesla stock will stop there. I think this is a stock with a long, clear path ahead.

Tesla spawned many imitators around the globe, but this is an expensive and difficult proposition. Others may try but only a few will succeed.

Investors looking to take profits probably already sold their shares in the days leading to the S&P 500 inclusion. If they didn’t sell by then, they may be talking to themselves now.

Buy-and-hold investors should be happy that Tesla stock is adding to the value of their nest eggs. Also, they should consider increasing to their positions when Tesla stock goes downhill.

And if you are looking to add TSLA to your portfolio, good choice!

On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.

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