Tuesday, April 20, 2021

Investors’ shunning of major tech companies is costing Tesla about $ 300 billion in market value

Shares of electric car manufacturer Tesla, which was the best performer in the Standard & Poor’s Index last year, tumbled to their lowest level in three months, on Monday, with the recovery of the broader market, which indicates that the technology stock market, which has witnessed a period From the recent boom, it may decline once the post-pandemic spending drives growth in other sectors.

FILE PHOTO: The logo of car manufacturer Tesla is seen at a branch office in Bern, Switzerland October 28, 2020. REUTERS/Arnd Wiegmann/File Photo/File Photo

The Dow Jones Industrial Average rose more than 400 points Monday afternoon, while Tesla shares fell by as much as 6%, as the passage of President Joe Biden’s $ 1.9 trillion stimulus plan on Saturday prompted investors to direct investors to blue-chip stocks (such as General Electric, up 4%) and away from major tech companies.
Tesla shares plunged 20% last week alone, after tumbling 8%, Thursday, when billionaire money manager Ron Barron told CNBC, a long-time large Tesla investor who announced that the stock could swell thirty times over his lifetime, that he had taken The “painful” decision to sell 1.8 million shares for “risk management”.
Although Barron stressed that prices could rise to about $ 2,000 over the next decade, he said that this step helped reduce risks in his portfolios after Tesla’s stock increased nearly 20-fold since he began buying shares in 2014, echoing the concerns of other experts. On the increasing volatility of stocks.
Tesla’s stock sell-off increased after Fed Chairman Jerome Powell said on Thursday that inflation will rise as the economy recovers, a development that led to higher Treasury yields and a stock crash.
Analyst Opinions
“Higher yields tend to knock out higher equity values ​​even more strongly,” Lindsay Bell, chief investment strategist at Ally Invest, said in a note on Thursday. “That’s why we’ve seen stocks like Tesla and Peloton drop more than 30% this year.”

Concerns about price rises have also affected the Ark Invest ETF, which has grown in popularity as technology dominates its “change-in innovation” investments but is now facing multiple losses and increasing investor exits.

Facts and figures
Tesla, which makes up about 1.5% of Standard & Poor’s shares, was among the ten worst-performing stocks on the index on Monday. Other underperforming companies include Apple and Alphabet, both of which are down around 3%. Although it is still up by 365% compared to last year, Tesla has fallen 35% since its highest level on January 26, and during the same period, the S&P has been at a nearly flat level.
Tesla has lost about $ 308 billion of its market value since January 26, when the company was valued at about $ 848 billion. CEO and Chairman Elon Musk’s net worth is estimated to be roughly $ 145 billion, according to Forbes.
In a note to clients on Tuesday, Bank of America said: In February, value stocks outperformed growth stocks like Tesla by the widest margin since the dot-com bubble burst in 2000. While the weak performance among growth stocks was led by the top five: Apple, Microsoft, Amazon, Facebook, and Tesla, which fell 5% last month.
Markets have seen some earnings panic in recent weeks, as the Dow Jones Industrial Average fell as much as 1,000 points in late February, as returns reached their highest level in one year. Fed Governor Lyle Brainard became one of the first central bankers in the United States to voice concerns about rising yields and said at a conference that this latest boom “caught her attention” significantly, earlier this month.
The Fed will likely come under pressure to raise historically low-interest rates in order to contain yields if they continue to grow, but experts have warned that any such tightening could send stocks lower. “The difficulty today is that we are now facing the most interest-sensitive stock market in Wall Street history,” Jim Stack, president of InvesTech Research, a company based in Whitefish, Montana, told Forbes in February.

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