Buying Tesla shares amid news of tariffs on automobile imports in US

Tesla Inc stock prices are recovering after reaching the local minimum of $324.93 on February 11. Since then, the prices have grown by 8.7%. The closing price was $355.69 last Friday. 

Tesla stock has declined about 37% since hitting the maximum on December 18. Despite this, it has recorded an overall growth of 29.4% since presidential elections on November 5. The gain is attributed to Tesla CEO Elon Musk’s close relationship with US President Donald Trump. Trump appointed Musk to lead the Department of Government Efficiency, which focuses on cutting federal spending. 

Earlier it was reported that a large hedge fund Bridgewater Associates took an interest in Tesla stock. According to the latest data, the fund was holding 153,589 Tesla shares worth $62 million by the end of December. Meanwhile, Bridgewater decreased its positions in such tech companies as Apple, Amazon, Nvidia, Microsoft, Meta, and Alphabet. Thus, the number of Apple shares was reduced by 40%, and the number of Amazon shares was cut by almost 35%. This indicates that investors see greater growth potential of Tesla, especially considering political support and development of the electric vehicle market. 

However, one of the key uncertainties for Tesla is the situation in China. Chinese authorities have not set a clear timeline for approving a license to use Tesla full self-driving technology. It was previously anticipated that approval could be received in the second quarter. Nevertheless, the delay is caused by the Chinese government considering using it as a tool in negotiations with the US president, according to the Financial Times. As a result, Tesla’s plans to begin large-scale training of its autopilot technology in China are on hold. Additionally, the company’s appeal to the Chinese market is diminished.

Another factor that may contribute to Tesla’s stock rise is Donald Trump’s intention to impose import duties on automobiles. It was announced on February 14 and has the potential to increase the price of foreign vehicles in the US domestic market, creating a competitive advantage for Tesla as a domestic manufacturer. Since imports account for about half of the US car market, the demand for Tesla vehicles is expected to rise as customers will prefer more affordable cars of local production over their expensive foreign counterparts. This will have a positive impact on the company's financial performance and hence its share price.

The technical analysis shows the prices correcting after a rebound on February 11. The MACD is below the signal line, indicating the persisting downtrend. However, the decline is slowing, which may be indicative of an upcoming reversal. The RSI is at the level of 34, which suggests the proximity to the oversold area and the possibility of correction.

Current recommendation: 

Buy at the current price. Take profit – $420. Stop loss – $309.06.