Tesla (TSLA -1.72%) is one of the most volatile megacap tech stocks. While owning Tesla has been (mostly) a great decision over the long term, timing has been critical.
While Tesla has a lot of exciting projects involving 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 whether 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. 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 a trend in the chart above. Right around Christmas, Tesla stock began to sell off. It has declined by roughly 8% since market close on Jan. 10.
Selling stocks at the end of the year is pretty common, especially for companies that have generated record gains over short periods. Moreover, Tesla recently published delivery and production figures for its electric vehicle (EV) operation for the fourth quarter, and they show that it missed 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 in. Given Musk's ties to the soon-to-be president, I would not be shocked in the slightest if Tesla stock starts to see an uptick.
Here's the reality: While Musk's relationship with Trump may bode well for Tesla -- especially as it relates to the company's ambitions in autonomous driving -- any gains leading up to or immediately following the inauguration are driven by a narrative, not Tesla's fundamentals.
Image Source: Getty Images
Is Tesla stock a buy before then?
I would encourage you to invest in Tesla stock right now only if you believe in the company's long-term vision for AI, self-driving cars, and robotics. If you do, it doesn't matter when you scoop up shares.
Since the election, Tesla has fared much like a meme stock. Nothing about the company changed on Nov. 5. Nothing is going to change for it on Jan. 20, either. We don't know how the company's autonomous driving efforts will shake out or what regulatory changes the incoming administration will make in that area.
Investing in momentum stocks like Tesla is usually risky. If you have a low tolerance for risk, you may want to steer clear.
