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Mar 11, 2022

Can Tesla Stock Hit New All Time Highs in 2022?

By:Ryan Sullivan

Tesla, Inc. (TSLA) started trading on the NASDAQ on June 29th, 2010, and put in its current high of $1,243.49 on November 4th, 2021. Tesla reached its 2022 low on February 24th, 2022, at $700.00, that is a 43.71% drop from its all-time high in 112 days (about 3 and a half months).

Tesla (TSLA) has spent the last 14 days (about 2 weeks) rallying from $700.00 and is currently trading above $800.00 this morning. Tesla's current Implied Volatility Rank (IVR) according to the tastyworks calculation is 47.2. The current Implied Volatility for the monthly options expiring in April and May is 69.0% with an expected move of +/-124.37 and 71.2% with an expected move of +/-182.12, respectively, as of this morning.

Tesla stock price technical analysis

Technically speaking, Tesla (TSLA) remains in a bear trend since its all-time high in November of 2021, recording lower-lows and lower-highs during the period. A breakout in price below $700.00 will likely show us a continued bear trend through Q2 and Q3 of 2022. A bullish breakout in price above the psychologically important $1,000.00 price level, followed by a breakout above the all-time high price of $1243.49, will likely indicate a bull trend that could be analogous to the strong rallies we have seen in Tesla’s past.

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What makes Tesla (TSLA) stand out from the crowd?

Tesla (TSLA) boasts an astounding 5-year revenue growth rate of 668.89% and a 5-year earnings growth rate of 571.15%. Tesla designs, manufactures, and sells electric vehicles, as well as stationary energy storage products. Tesla’s unique approach to automotive manufacturing and sales set it apart from its competitors.

Tesla (TSLA) continues to sell their vehicles directly to the consumer via their Tesla dealerships and directly from their webpage. Whether you are a fan of Tesla CEO Elon Musk or not, he has shown over the last five-year period that his approach and his products are in demand and made available in ways the consumer wants.

How does Tesla (TSLA) compare technically with its competitors?

Although Tesla (TSLA) has enjoyed incredible market value compared to its competitors, its global market share of electric vehicles is decreasing as established automakers race to flood the growing electric vehicle market with their products. Ford Motors Company (F) and General Motors Company (GM) recognize the success Tesla has had and continue to increase the development of their electric vehicle lineups to compete with newcomer Tesla and the growing electric vehicle market.

Fig. 1: One-year percentage change comparison graph of Ford (F), Tesla (TSLA), and General Motors (GM) stock price.

Figure 1 shows us that over the last year of trading, Tesla (TSLA) and Ford (F) have produced similar percentage gains, while General Motors (GM) has failed to maintain its starting value. We can compare the price movement of these three competitors and see that market influences on their sector are shared, even though Tesla (TSLA) and Ford (F) posted gains while General Motors (GM) posted a comparable loss. This gives us perspective on these three companies, specifically that General Motors (GM) has not fared as well as Tesla (TSLA) and Ford (F) during the same period of market conditions.

Fig 2: One-year percentage change comparison graph of Tesla (TSLA) and SPDR S&P 500 ETF Trust (SPY) stock price.

Tesla (TSLA) is currently the sixth largest component of the SPDR S&P 500 ETF Trust (SPY) with a holding percentage of 1.93%. Figure 2 helps to illustrate that since Tesla (TSLA) makes up a relatively substantial portion of the SPY ETF, we can predict that the price of SPY is correlated to the value of Tesla’s percentage gains and losses over the same period.

Fig 3: Three-month rolling correlation over a five-year period of Tesla (TSLA) and SPDR S&P 500 ETF Trust (SPY).

Figure 3 confirms our assumption that Tesla (TSLA) and the SPDR S&P 500 ETF Trust (SPY), over the last five-year period, maintained a positive correlation, vacillating between a low positive correlation and an above 50% correlation during the period.

Fig 4: Three-month rolling correlation over a five-year period of Tesla (TSLA) and Ford Motors Company (F).

Interestingly, Figure 4 shows us that even though Tesla (TSLA) and Ford (F) compete in the same markets globally, the correlation between the two often approaches zero, followed by spikes in correlation. This graph can help us infer information about how Tesla differs from Ford in their business practices.

It is reasonable to assume that since the correlation between the two often approaches zero, the market is pricing Tesla (TSLA) and Ford (F) based on factors that separate their competitive behaviors. At the same time, we can infer that the large spikes in correlation between the two are based on factors that affect automakers in general. For example, cost of materials or consumer behavior.

What’s Tesla’s stock outlook as an automaker compared to entrenched competitors?

This data illustrates for us two conflicting scenarios that make for volatile price behavior and incredible trading opportunities. As much as the market might want to think of Tesla (TSLA) as an outlier in the world of electric vehicle manufacturing, it is still worth considering that its price is subject to market forces that affect the entire automotive industry and electric vehicle manufacturers.

Conversely, Tesla’s (TSLA) periods of low-to-inverse correlation with its direct competitor Ford (F) helps us understand that the market understands the differences between Tesla, Ford, and General Motors and prices their stock accordingly based on sentiment, often taking the price of Tesla in an uncorrelated direction, to find a price that better represents its relationship to its competitors.

It is reasonable to assume that because we see these divergences in price correlation between Tesla (TSLA) and its direct competitor Ford (F), the price of TSLA will likely see price swings in to trading ranges that are yet to be discovered.

It is also likely that Tesla (TSLA) has yet to reach its full potential in manufacturing output and consumption by the consumer. If that is true, we can predict larger valuations from Tesla as well as from its competitors, as the electric vehicle market continues to evolve.

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