Tesla (TSLA -0.05%) is one of the most volatile mega cap tech stocks in the capital markets. While owning Tesla has been (mostly) a great decision over the long term, timing has been a critical variable determining whether or not you've made money in the stock.
While Tesla has a lot of exciting projects surrounding artificial intelligence (AI) right now, I'm remaining cautious as an investor for the time being. Below, I'm going to break down why Jan. 20 could be a particularly important date for Tesla investors and explore if the stock is a buy before then.
Examining Tesla's volatility
Let's break down Tesla's stock performance in 2024.
Between Jan. 1 and Nov. 4, 2024, Tesla stock dropped by only 2.3%. However, shares were actually down by as much as 43% at one point during this period.
Following Donald Trump's victory in the U.S. presidential election on Nov. 5, Tesla stock found some new life. Between Nov. 5 and Dec. 31, shares of Tesla gained 61% and the company reclaimed its position in the trillion-dollar club.
Tesla CEO Elon Musk emerged as a major Trump surrogate during the final months on the campaign trail. As such, investors and Wall Street personalities alike began to see the Trump-Musk alliance as a bullish indicator for Tesla.
While that may sound great, take a look at the direction of the trendline in the chart above. Right around Christmas, Tesla stock began to sell off -- declining by roughly 8% over the last three weeks or so (as of market close on Jan. 10).
Selling stocks at the end of the year is pretty common, especially in companies that have generated record gains in short time frames. Moreover, Tesla recently published delivery and production figures for its electric vehicle (EV) operation for the fourth quarter, missing Wall Street's expectations.
Although Tesla stock appears to be stuck in a downward trend, I wouldn't be surprised to see shares rebound as Jan. 20 inches closer. Let's dig into why.
What is happening on Jan. 20?
On Jan. 20, president-elect Donald Trump will be sworn into office and assume the Chief Executive position of the U.S. Given Musk's ties to the soon-to-be-president, I would not be shocked in the slightest if Tesla stock started to see an uptick.
Here's the reality: while Musk's relationship with Trump could very well bode well for Tesla -- especially as it relates to the company's ambitions in autonomous driving -- any gains experienced in Tesla stock leading up to or immediately following the inauguration are driven by a narrative, not concrete or tangible fundamentals.
Image Source: Getty Images
Is Tesla stock a buy before Jan. 20?
I would only encourage investing in Tesla stock right now if you believe in the company's long-term vision around AI, self-driving cars, and robotics. If that's the case, then the particular date on which you scoop up shares is a non-starter.
However, the overarching trends explored throughout this article underscore the idea that Tesla has mimicked the behavior of meme stocks following the election. Said differently, nothing really changed about Tesla's current state of affairs following Trump's victory on Nov. 5.
Right now, I think there is a lot of hype surrounding Tesla that is ultimately rooted in bullish narratives that are not yet manifesting in the company's actual performance. Nothing is going to change for Tesla overnight following Jan. 20. There are still a lot of unknowns revolving around the company's autonomous driving roadmap, and how the incoming administration could make regulatory changes that positively impact Tesla's long-run trajectory.
At the end of the day, investing in momentum stocks such as Tesla tend to carry a high degree of risk and may not be suited for those unprepared for volatility and unpredictability.
