Tesla Stock Falls Post Elon Musk’s Twitter Purchase. What’s Next?

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Tesla (NASDAQ:TSLA) stock has declined by close to 13% over the last week (five trading days) and also remains down by around 12% over the past month (21 trading days). While the broader markets and growth stocks in particular have been impacted by hawkish comments by the Fed, Tesla has been weighed down by CEO Elon Musk’s recent acquisition of the social media app Twitter.  Although Mr. Musk has purchased Twitter in his individual capacity, he has sold Tesla shares to fund the purchase and investors are concerned that more stock sales will be required as Twitter remains loss making, with a sizable debt load and interest payments. Several advertisers have also been leaving the platform, putting further pressure on revenue. Moreover, Twitter could be seen as an unwanted distraction for Mr. Musk, forcing him to take time away from his role at Tesla.

However, now that Tesla stock has seen a decline of about 12% over the last month, will it continue its downward trajectory in the near term, or is a recovery imminent? Going by historical performance, there is a 63% chance of a rise in TSLA stock over the next monthOut of 331 instances in the last ten years that Tesla stock saw a twenty-one-day decline of 10% or more, 207 of them resulted in the stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 207 out of 331, or a 63% chance of a rise in TSLA stock over the coming month, implying a positive near-term outlook for the stock. See our analysis on  Tesla Stock Chance of A Rise for more details.

Calculation of ‘Event Probability’ and ‘Chance of Rise’ using the last ten years’ data

  • After moving -13% or more over five days, the stock rose in the next five days on 66% of the occasions.
  • After moving -7% or more over ten days, the stock rose in the next ten days on 57% of the occasions
  • After moving -12% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 63% of the occasions.
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Returns Nov 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 TSLA Return -13% -44% 1283%
 S&P 500 Return -2% -20% 70%
 Trefis Multi-Strategy Portfolio -3% -25% 197%

[1] Month-to-date and year-to-date as of 11/8/2022
[2] Cumulative total returns since the end of 2016

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