Tesla Stock Crashes amid ‘Dumb’ Coronavirus Panic

  • Tesla stock (NASDAQ:TSLA) had its second-worst weekly fall last week. The company’s worst weekly fall was earlier this year. Notably, the coronavirus-led stock market crash is the common thread between both of the sell-offs.
  • Tesla CEO Elon Musk downplayed the coronavirus risk on two occasions. However, stock markets seem to think otherwise.

Tesla stock versus the S&P 500

Last week, Tesla stock fell 22.3% and had its second-worst weekly fall. The stock fell 25.8% in the week ending February 28, which was its worst weekly fall. Last week could have been the worst week for the stock if there hadn’t been a late market surge. On March 13, the stock price whipsawed from a low of $502 to a high of $607. The stock recouped most of its intraday losses and closed down 2.5%. In contrast, the Dow Jones Index and the S&P 500 rose more than 9.0%. Tesla stock has fallen more than 43% from its 52-week high of $968. However, the company capitalized on the rise in its share price by issuing fresh equity. NIO (NYSE:NIO) has also raised capital through convertible notes.

Musk on the coronavirus

Tesla CEO Elon Musk shared his opinion on the coronavirus twice. On March 7, Musk said that the coronavirus panic was “dumb.” However, he didn’t specify whether the reaction from financial markets, the general public, or governments was dumb. Musk’s tweet was the most liked in that week. Tesla stock rose 5.4% in the week ending March 13.

However, US stock markets crashed last week. The Dow Jones Index and the S&P 500 entered into the bear market territory. TSLA also fell sharply last week.

Musk and Tesla stock

After his controversial tweet calling the panic “dumb,” Musk expressed his opinion about the coronavirus again. According to BuzzFeed News, citing a leaked email to SpaceX employees, Musk downplayed the coronavirus risk. Musk said, “As a basis for comparison, the risk of death from C19 is *vastly* less than the risk of death from driving your car home.” Previously, President Trump downplayed the coronavirus threat. However, he declared a national emergency last week amid surging coronavirus cases in the US.

While Tesla stock has crashed over the last month, it’s still treading with year-to-date gains of more than 30%.

What’s next for the stock?

Tesla stock has risen sharply since October 2019. As the stock soared, bulls got charged up and predicted that Tesla would be the next trillion-dollar company. Bulls paid little attention to the company’s soaring valuations and dismal profitability record. The electric vehicle story is for real. No matter what Tesla stock bears might say, it has a formidable lead in electric cars. Legacy automakers have raised their game to take on Tesla. While Tesla has won the market capitalization race with legacy automakers, we’ll see real competition between automakers this decade. However, when it comes to Tesla stock, markets got a little carried away earlier this year. With the recent crash, the stock is just reverting to more fundamental value.

However, bulls might want to buy Tesla stock at the current prices. Read Should You Buy Tesla Stock? Advice from Warren Buffett to learn more.