It’s almost certainly not the start to the new year that electric vehicle manufacturer Tesla (NASDAQ:TSLA) had envisioned. Thanks to the influence and political success of CEO Elon Musk, TSLA stock saw a dramatic spike in market value late last year. However, since the January opener, the equity finds itself down almost 30%. While the print is ugly, there’s a chance that over time, circumstances may improve for the EV leader.
On the surface, though, such a notion seems far removed from reality. On Friday, TSLA stock inked its third consecutive down week, a rare event. Of the more than 300 trading sessions that have materialized since January 2019, TSLA has only witnessed 18 incidences of such negative streaks. Even more problematic, the chance of a reversal in the fourth week (as in this week) is only 50/50.
Another problem for TSLA stock is political. For sure, investors must acknowledge the Trump tariffs on Canada and Mexico, which the administration just announced will go into effect on Tuesday. But on a more specific level relevant to Tesla, the president has consistently supported the hydrocarbon industry. That likely means that the progress the EV industry made toward green mobility faces some potholes.
Arguably, though, the biggest concern for TSLA stock is Elon Musk himself. With the Tesla CEO aligning himself with right-wing sentiments, he risks alienating prospective EV buyers. One of the popular trends in social media is broadcasting footage of Tesla cars which have suffered vandalism. And it’s not just hooliganism that may hurt TSLA. As Money Morning’s Chris Johnson explained, recently, “the state of California reported a significant drop in Tesla registrations.”
Now, California is a liberal stronghold so that needs to be taken into account. Nevertheless, the point stands — controversial political opinions and generally caustic sentiments have sparked consumer pushback.
Of course, the events leading up to the pushback represent unforced errors. At the same time, it’s unclear how long this negative trend can sustain itself.
Amid all the noise, it’s difficult to appreciate that TSLA stock still undergirds a quality business that distributes a quality product. By quality, I’m not necessarily talking about the fit and finish of the vehicles themselves, which as I understand lacks the refinement of top-tier legacy automakers. Rather, I’m referring to the popularity of Tesla-branded EVs.
Drive around town in a reasonably populated city and you’ll almost certainly come across at least one Tesla during your trip (if you’re not driving one yourself). These vehicles have rapidly become a cornerstone of personal mobility. To be sure, the protests against the company represent a significant reputational blow. Nevertheless, political animus has always been a difficult sentiment to sustain.
Case in point is beverage maker Anheuser-Busch (NYSE:BUD). Roughly two years ago, the beer maker’s Bud Light brand rubbed many conservative consumers the wrong way due to a campaign featuring a social media influencer who documented her gender transition. Without rehashing the sordid details, the accusation was that Bud Light had gone woke — and it was time for conservatives to send a message.
Sure enough, that message was sent and quite colorfully in some cases. Investors eventually trimmed some exposure to BUD stock, perhaps due to the heat that Anheuser-Busch incurred. While the reputation damage was apparent among large swathes of the consumer base, the security itself recovered within a year of the controversy.
Other companies have also angered their customers, including Nike (NYSE:NKE) with its “Just Do It” campaign featuring controversial former NFL quarterback Colin Kaepernick. As you’ll recall, Kaepernick set off a wave of pearl clutching, particularly among conservatives. It was a very ugly time because critics accused the quarterback of being anti-military — a big no-no in modern U.S. politics.
And did NKE stumble, never to recover from the mess? Quite the opposite, Nike ranked among the top winners of the post-pandemic paradigm before market forces eventually took the air out of the ball.
Fundamentally, the same outcome could be in store for TSLA stock. There’s ugliness in the moment. Eventually, though, the core value driver of the business will likely shine bright, making TSLA an intriguing (albeit speculative) opportunity.
Finally, it’s worth pointing out that TSLA stock enjoys an upward bias. Using data over the past six years, a position entered at the beginning of the week has a 54% chance of rising by the end of it. This baseline probability is quite decent at almost 53% over an eight-week period.
What’s really interesting is that dynamic probabilities — in this case accounting for last week’s high volatility — may drive TSLA stock above the psychological threshold of $300. Whenever TSLA loses between 10% and 20% in a one-week period, the subsequent week’s long odds rise to 55%. Over an eight-week period, these odds stand at 60%.
Running a guided Monte Carlo simulation — which takes into account market realistic dynamics — it’s possible for TSLA stock to reach $327.55 over the next eight weeks. This could actually be a conservative target, with median returns under similar circumstances suggesting a price of over $339.
