Tesla Stock Is Diving Because Coronavirus May Burst Its Crazy Bubble, Crypto Coins News
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Tesla stock (NASDAQ: TSLA) dove 7.5% on Monday, falling twice as hard as the Dow and S&P 584.
Tesla has had a turbulent February, with coronavirus fears beginning to eat into its growth.
Analysts warn That Tesla stock is in a bubble and due for a big correction.
Yesterday’s stock market plunge was especially painful for Tesla. Driven by fears over the coronavirus and by general market bearishness, investors sold off shares in the electric car maker at a staggering pace.
Yet Tesla’s sudden drop is about more than just the coronavirus or the global investment climate. Analysts have long been warning that it’s due a big correction. It looks like the Tesla bubble has finally begun to burst.
Tesla Stock Is Going Down This Year
It’s no accident Tesla fell twice as hard as the broader stock market on Monday. | Source: REUTERS / Amanda Voisard
The
1,
. point Dow Jones slide may have dominated the headlines , but that 3. % sell-off was far less severe than Tesla’s 7.5% hammering.
In other words, Tesla had a much harder Monday than the rest of the market. And it looks like the days and weeks to come will be even harder for the company.
Tesla stock has surged over the past month, though it’s endured some sharp corrections too. | Source: Yahoo Finance
Most experts say coronavirus is the reason why Tesla stock is struggling to secure the gains from its recent rally. The manufacturer has a plant in Shanghai and relies on Chinese suppliers for parts. Consequently, it’s more exposed to Chinese fortunes than other companies.
Over the past few years, shares in tech companies have become negatively correlated with interest rates . The rest of the economy isn’t growing strongly, so folks with money have inflated shares in “promising” tech companies to bubble-level proportions. They believe this is the only way they can get a decent return on investment.
Unfortunately, numerous analysts believe that the flight to Tesla stock and other tech shares only masks significant risks. As Goldman Sachs’ head of global securities research, Robert Boroujerdi, explained in :
We believe low realized volatility can potentially lead people to underestimate the risks inherent in these businesses. The fear is that if fundamental events cause volatility to rise, these same passive vehicles will sell and exacerbate downside volatility.
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