Down 37% Last Month, Is Tesla Stock Set For A Rebound?

Tesla (NASDAQ:TSLA) stock has seen considerable selling pressure, falling by almost 37% over the last month (about 21 trading days), amid mounting concerns that demand for the company’s vehicles is slowing down. Tesla reduced prices on its Model 3 and Y vehicles in the U.S. by $7,500 through December 31, 2022, while also offering complementary supercharging. While these perks were intended to get customers to take delivery of vehicles in December instead of waiting for the new federal credits that went into effect in January, they could indicate that Tesla is seeing some pressure. Tesla has also been resorting to discounts in China, and there are reports that the company is reducing its production schedule at its Shanghai plant for January. Separately, Tesla stock also continues to be weighed down by CEO Elon Musk’s recent acquisition of the social media app Twitter. Mr. Musk has been selling Tesla shares to fund his purchase, and investors are also concerned that Twitter could be seen as an unwanted distraction for Mr. Musk taking away from his time at Tesla.

However, now that Tesla stock has seen a decline of about 37% over the last month, will it continue its downward trajectory in the near term, or is a recovery imminent? There were only nine instances in the last 10 years when Tesla’s stock saw a trailing 21-day drop of 37% or more. Given how unlikely such an exceptional stock price movement is, we looked at the 120 instances where TSLA stock saw an unusual drop of 20% or more over a 21-day period. Out of this, 70 of these instances resulted in TSLA stock rising over the subsequent one-month period (21 trading days). This historical pattern reflects 70 out of 120, or about a 58% chance of a rise in Tesla stock over the next month, implying a marginally positive outlook for Tesla stock. See our analysis on  Tesla Stock Chance of Rise for more details.

[1] Month-to-date and year-to-date as of 1/1/2023
[2] Cumulative total returns since the end of 2016