(Bloomberg) — Elon Musk’s fans are known for their commitment to Tesla Inc., but in the current rout of the stock even long-term believers are backing away.
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The retreat from Musk’s electric vehicle company, which has been the biggest decliner in the S&P 500 Index this year, has been so extreme that on Monday night President Donald Trump intervened, saying he would buy a new Tesla to support Musk.
On Tuesday, Trump chose a red Model S from the Teslas that were delivered to him at the White House. The stock rose 6% by 10:45 a.m. in New York on Wednesday, putting it on track to extend gains as it attempts to stage a rebound following Monday’s 15% rout. But despite the presidential purchase — and the apparent opportunity to buy the dip — Musk’s faithful are nervous to wade in and scoop up shares on the cheap, fearing that the bloodbath may be far from over.
The stock was down 52% from the all-time high touched in mid-December as of Tuesday’s close and it has given back all of the gains it experienced after the election, back when traders were betting that Tesla would benefit from Musk’s close ties to the new president.
“This stock is trading on feelings right now and the downside pressure is winning; there is more room for the stock to fall in the next 30-60 days,” said Brian Mulberry, client portfolio manager at Zacks Investment Management Inc., which oversees about $21 billion in assets. The shares “can easily go down to $200 or even below in the short term.”
Zacks held more than 270,000 Tesla shares as of Dec. 31. and Mulberry said he could see the stock getting back above $400 next year. But he is staying on the sidelines for now.
He isn’t alone. As the price fell under $230 this week, down from over $400 less than two months ago, Wall Street analysts — even some of those with a buy-recommendation — have been taking a more cautious stance. Just over the past week, at least four analysts lowered their price targets on Tesla, while two other long-term bullish analysts warned about poor sales and “negative” sentiment.
One of the few sources of support have been the retail traders who are among Musk’s most reliable fans. These small investors have, on net, purchased $2.8 billion of Tesla stock since last Tuesday, according to Emma Wu, a global quantitative and derivatives strategist at JPMorgan Chase & Co.
