Shares of Tesla Inc. began to fall on Thursday as the company's historic 13-day winning streak came to an end. The stock dropped by as much as 3.7% at the opening of the market after experiencing a slight decline of 0.7% on Wednesday. This sudden dip in Tesla shares comes after a historic surge of 41% in just 13 consecutive days of gains. This pattern of gains had driven the electric car giant to become the world’s most valuable automaker, prompting concerns among technical analysts that the shares had become overbought.
The surge in Tesla's shares was driven by several key developments, including announcements by General Motors Co. and Ford Motor Co. that they are working to adapt their electric vehicles to Tesla’s Superchargers, thereby reducing switching barriers for consumers. Furthermore, the Tesla Model 3 sedans became eligible for the full U.S. tax credit, adding to the hype surrounding the company. In addition, investors have shown an increasing appetite for artificial intelligence stocks which have further buoyed Tesla's shares.
The hawkish stance taken by the Federal Reserve on Wednesday has had a noticeable impact on the shares of companies that experienced significant gains in 2019, including Tesla and Nvidia Corp., which has led the mega-cap tech stocks higher this year. The drop in Tesla shares seems to indicate a pause for breath after a period of sustained growth, highlighting the volatile nature of the stock market.
Despite this setback, Tesla's future outlook remains positive. Several analysts have raised their price targets for the company, with RBC Capital Markets’ Tom Narayan saying that the self-driving cars, known as "Robotaxis," could eventually represent 70% of Tesla's value. Similarly, Daiwa analyst Jairam Nathan stated that the broader industry shift toward Tesla’s charging standard in North America will help refocus the investment horizon for the company to the longer term, from the attention on the cadence of quarterly results.
In summary, the decline in Tesla's shares after a historic winning streak highlights the volatile and unpredictable nature of the stock market. While the company's near-term performance remains in question, its long-term outlook remains bright, buoyed by a series of positive developments and a strong commitment to innovation.