Why did Tesla stock fall in January

2022-02-07T15:43:02
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Why did Tesla stock fall in January

 

Why Tesla shares fell in January: Tesla shares fell 11.4% in January, according to S&P Global Market Intelligence.

The leading electric vehicle maker reported solid growth across the board in its fourth-quarter report,
but that wasn’t enough for investors, who collectively sold shares following the results. 

Moreover, high-growth stocks like Tesla are seeing pressure on the macro economy ,
from the threat of a rate hike by the Federal Reserve, which is likely to start this spring.

Evest Follows Tesla Development in the following report

Topics:

Fourth Quarter Report

The effect of raising interest rates on Tesla Stocks

The company’s market value

 

Fourth Quarter Report

 

On January 16, Tesla announced its financial results for the fourth quarter of 2021.

Total revenue increased 65% year over year to $17.7 billion in the period, and adjusted earnings per share were $2.54.

Both numbers beat Wall Street estimates aligned with the results, but it wasn’t enough for investors to bid on Tesla stock,
with shares falling the day after the report.

In the days following the results, Tesla’s stock traded with extreme volatility, causing 5% to move up and down on different trading days.

 

The effect of raising interest rates on Tesla Stocks

 

Perhaps more important than the earnings results (which were somewhat in line with expectations)
are the announcements from the Federal Reserve that it will likely start raising rates in March. 

Why does this affect Tesla stock? Because when the Federal Reserve raises interest rates, it leads to higher yields on Treasuries.

This in turn makes owning individual stocks less attractive on average due to the increased returns that you can get from lower risk assets like Treasuries.

Several high-growth stocks were sold off after this change in sentiment; Tesla is one of them.

 

The company’s market value

 

Tesla stock is now down about 14% since the start of the year.

But considering the massive increase it has experienced over the past five years, the company’s market capitalization is still $913 billion,
making it one of the largest in the world by market capitalization.  If you’re an investor in Tesla or considering buying stock in the company,
it’s market value that matters in your decision, not whether the stock has fallen in the last month or gone up a significant amount in the past five years. 

In the short term, interest rate hikes, broad economic developments and market sell-offs could affect Tesla’s stock price.

But in the long run, the returns will be determined by how much free cash flow it can generate compared to the price you pay for the stock.

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