Tesla Inc. (TSLA) has taken a sharp turn downward, shedding over 6% in Tuesday’s trading and extending its recent losing streak.
The once high-flying stock, which surged following former President Donald Trump’s election victory, is now facing a hard dose of reality. Investors who bet on Tesla’s political proximity to the White House easing regulatory hurdles for its self-driving ambitions are now turning their focus back to the company’s fundamentals.
Tesla remains the most expensive mega-cap tech stock relative to expected earnings, raising concerns about a potential further decline. With the stock breaking below key technical levels, analysts are sounding the alarm. Michael Purves, CEO of Tallbacken Capital Advisors, sees an opportunity in buying put spreads, specifically the $300/$250 spread expiring in May. With implied volatility at the lower end of its range, options traders are positioning for more downside risk.
Technical Weakness and Investor Skepticism
Tesla’s stock has now dropped 28% from its December 2024 peak of $484 billion in market capitalization. Weak sales figures, particularly in China and Europe, have rattled investors, as has the company’s latest earnings report, which fell short of expectations. Analysts at Deutsche Bank warn that Tesla faces stagnation due to growing “EV fatigue” and heightened competition.
The broader options market is also signaling a shift. The premium for one-month call options over puts has disappeared, indicating traders are no longer betting on Tesla’s upside. Volatility, which had been on a steady decline, is now picking up, reflecting renewed uncertainty around the stock.
Some Wall Street analysts remain optimistic about Tesla’s long-term AI and robotics strategy, but near-term concerns over sales, margins, and regulatory challenges weigh heavily on investor sentiment. With hedge funds reassessing their positions and technical indicators pointing to further downside, Tesla may be in for a turbulent ride ahead.
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Tesla remains the most expensive mega-cap tech stock relative to expected earnings, raising concerns about a potential further decline. With the stock breaking below key technical levels, analysts are sounding the alarm. Michael Purves, CEO of Tallbacken Capital Advisors, sees an opportunity in buying put spreads, specifically the $300/$250 spread expiring in May. With implied volatility at the lower end of its range, options traders are positioning for more downside risk.
China’s BYD Gains Ground in the EV Race
Adding to Tesla’s challenges is growing competition from China’s BYD, which has partnered with AI firm DeepSeek to enhance its self-driving technology. Unlike Tesla, which has struggled to gain regulatory approval for its Full Self-Driving (FSD) software in China, BYD is pushing ahead with its “God’s Eye” advanced driver assistance system across its entire lineup. The move signals a potential shift in the autonomous vehicle space, with Chinese automakers integrating cutting-edge AI at a fraction of Tesla’s cost.
Despite Tesla’s dominance in EV sales, BYD is closing the gap. With the advantage of lower manufacturing costs and aggressive software development, the Chinese automaker is becoming an even bigger threat in key international markets. While U.S. tariffs currently shield Tesla from direct BYD competition at home, the global EV landscape is shifting in favor of more affordable and technologically versatile options.
Adding to Tesla’s challenges is growing competition from China’s BYD, which has partnered with AI firm DeepSeek to enhance its self-driving technology. Unlike Tesla, which has struggled to gain regulatory approval for its Full Self-Driving (FSD) software in China, BYD is pushing ahead with its “God’s Eye” advanced driver assistance system across its entire lineup. The move signals a potential shift in the autonomous vehicle space, with Chinese automakers integrating cutting-edge AI at a fraction of Tesla’s cost.
Despite Tesla’s dominance in EV sales, BYD is closing the gap. With the advantage of lower manufacturing costs and aggressive software development, the Chinese automaker is becoming an even bigger threat in key international markets. While U.S. tariffs currently shield Tesla from direct BYD competition at home, the global EV landscape is shifting in favor of more affordable and technologically versatile options.
Technical Weakness and Investor Skepticism
Tesla’s stock has now dropped 28% from its December 2024 peak of $484 billion in market capitalization. Weak sales figures, particularly in China and Europe, have rattled investors, as has the company’s latest earnings report, which fell short of expectations. Analysts at Deutsche Bank warn that Tesla faces stagnation due to growing “EV fatigue” and heightened competition.
The broader options market is also signaling a shift. The premium for one-month call options over puts has disappeared, indicating traders are no longer betting on Tesla’s upside. Volatility, which had been on a steady decline, is now picking up, reflecting renewed uncertainty around the stock.
Some Wall Street analysts remain optimistic about Tesla’s long-term AI and robotics strategy, but near-term concerns over sales, margins, and regulatory challenges weigh heavily on investor sentiment. With hedge funds reassessing their positions and technical indicators pointing to further downside, Tesla may be in for a turbulent ride ahead.
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