No one could ignore Tesla's price drop during morning trading session, as the stock fell to $237.19, logging a -2.0% underperformance of the S&P 500. The stock is still trading within range of its average target price of $239.82, which may prove to be a resistance point to further declines. Analysts have given the Auto Manufacturers stock target prices ranging from 24.33 to 350.0 dollars per share, with an average rating of hold.
The market sentiment on the stock is decidedly optimistic, since Tesla has a short interest of only 2.8%. This is the percentage of the share float that is being shorted. Each short position represents an investor's expectation that the price of the stock will decrease in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 44.2% of Tesla's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
To sum up, Tesla is probably the subject of mixed market sentiment because of an analyst consensus of some upside potential, a hold rating, an average amount of shares sold short, and only a small number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about TSLA:
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The stock has trailing 12 month earnings per share (EPS) of $3.08
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Tesla has a trailing 12 month Price to Earnings (P/E) ratio of 77.0 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 14.72 in contrast to the S&P 500's average ratio of 2.95
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Tesla is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.33 and 3.12 respectively
