Here’s why Tesla (TSLA) stock price could crash to $500

Tesla (NASDAQ:TSLA) stock price is in trouble. The shares have tumbled more than 40% from their high this year, taking its market capitalization to more than $802 million. They fell more than 4% in premarket trading, bringing Elon Musk’s net worth to around $227 billion. He lost $42 billion this year.

Why is TSLA collapsing?

There are several reasons why Tesla stock price has been on a strong downtrend over the past few months. First, the selloff is part of the overall weakness in other stocks given that all indices like the S&P 500 and Nasdaq 100 have all fallen more than 10% this year.

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Second, there are fears that the world will experience a sharp downturn this year, which will affect most businesses. In a letter to executives, Musk warned he felt terrible about the economy. As a result, he warned that the company could soon lay off around 10% of its workers.

Third, Tesla’s stock price fell due to Musk’s distraction with his plan to acquire Twitter in a $4 billion deal. Analysts think Musk could be distracted since he already runs three companies: Tesla, Boring Company and SpaceX.

Fourth, the current crisis in Ukraine has helped drive the cost of electric vehicle materials much higher, with nickel hitting multi-year highs. The cost of other things like salaries and other raw materials. As a result, the company was forced to raise its prices.

Finally, Tesla’s stock price crashed on valuation metrics. At its peak, it was valued at over $1 trillion, which was a higher valuation than the rest of the automakers combined. Now, with its growth slowing, investors are assigning a different multiple to the stock. Additionally, electric vehicles have become a commodity, with other automakers like Toyota, VW, and GM unveiling their EV products.

Tesla stock price prediction

Tesla stock price

Turning to the daily chart, we see that Tesla stock price has been on a strong downtrend over the past few months. Closer examination shows that it has formed a descending triple top pattern which is shown in black. In price action analysis, this pattern is usually extremely bearish.

At the same time, Tesla formed a death cross, which occurs when the 50- and 200-day moving averages cross. Therefore, I expect Tesla stock price to likely have a bearish breakout at $500.

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Karen J. Nelson