Should Investors Take a Bite out of Tesla, Inc. (TSLA)?

The recent development in Tesla, Inc. (NASDAQ:TSLA) stock have made investors to juggle around with their spending. Many analysts use price trends and patterns to predict future performance, and we can glean some important insights about TSLA by examining the chart.

How has the stock performed recently?

Tesla, Inc. (NASDAQ:TSLA) has been trading in a bearish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of TSLA has increased +5.71%. Shares are now up over the past year, outperforming the broad market by -100% and underperformed a peer group of similar companies by -4%. After the latest session, which saw the stock close at a price of $350.02, TSLA sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that TSLA may be headed in the future. To do this, analysts often study the speed and magnitude of a stock’s price movements with what are known as momentum indicators. The logic is that as a stock’s momentum slows, it may be nearing key support or resistance levels and possibly the end of a current trend. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for TSLA is 61.27%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 91.43%, tells a different story, and suggests that TSLA currently trades in overbought territory.

What do the trading volumes reveal?

Analysts use volume trends to assess the level of conviction behind a stock’s price changes. When volumes suddenly increase above normal levels, it can be a sign that investors feel very strongly in one way or the other about the future direction of a stock, or may even have access to inside information. Tesla, Inc. (TSLA) average trading volume of 5,603,995 during the past month is 15.03% below its average volume over the past year, indicating that investors have been less active than usual in the stock in recent times.

What do the analysts think?

TSLA is currently overvalued by 11.41% relative to the average 1-year price target of $314.17 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.00, which implies that analysts are generally neutral in their outlook for TSLA over the next year.

How risky is the stock?

When analyzing a stock’s price performance, it’s essential to take risk into account. Beta, which measures a stock’s volatility relative to the overall market, can be used to gauge the level of systematic risk associated with a particular stock.

Tesla, Inc. (NASDAQ:TSLA) has a beta of 0.94, compared to a beta of 1 for the market, which implies that the stock’s price movements are less extreme than the market as a whole. TSLA therefore has an below average level of market risk. During the past couple of weeks, TSLA average daily volatility was 30.18%, which is 2.29 percentage points lower than the average volatility over the past 100 days.

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