New Buy Price for Tesla, Buy the Dip on Carvana?
As Tesla hits a speed bump, are the wheels coming off of Carvana?
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The holidays are over. Santa got lost on his way to the rally, and the New Year’s champagne has gone flat.
The good news, at least from a seasonal perspective, is it’s a good time to own stocks. The January-April period tends to be positive for equities. January is historically strong, with an average return of over 1% since 1928.
It’s too early to say if this month will disappoint investors, but the S&P 500 (left chart) crept closer to a deeper pullback on Monday. The large-cap index has formed a topping pattern (shaded yellow) that suggests a drop to 5700.
The Nasdaq 100 (right chart) is stronger than the S&P 500, but also looks shaky. On Monday, the tech-heavy index closed beneath its 50-day moving average (blue) for the first time since September 13.
Tesla TSLA fell 6.14% on Monday after announcing a decline in deliveries for 2024. The EV maker delivered 1.79 million vehicles in 2024, down slightly from 1.81 million in 2023. Tesla shares have dropped by 21% — a loss of $100 per share — since closing at an all-time high of $479 on December 17.
While the velocity of Tesla’s retreat has been alarming, keep in mind that this stock climbed 62.52% last year, after rising 101.72% in 2023. If you’re looking to initiate or add to a position in Tesla, the stock’s 50-day moving average (blue), currently located near $350, looks like a good place to start.
Speaking of autos, Carvana CVNA is a hot topic. On Monday, Hindenburg Research dropped a bombshell report on the online auto sales company, accusing it of “an accounting grift for the ages.”
Hindenburg’s accusations aren't based on Carvana’s sales, but rather its treatment of auto loans. Hindenburg alleges that Carvana engages in lax loan underwriting, and is selling its loans to a company related to itself, run by Carvana director Dan Quayle.
Carvana lost 1.78% on Monday, leading some analysts to claim that the stock is shrugging off the allegations. However, the stock is down 23% since closing at an all-time high of $260 on November 25 (red arrow), just over a month ago.
Keep in mind that Hindenburg took aim at one-time market darling Super Micro Computer SMCI last year. That stock is down by nearly 75% since reaching its all-time closing high (red arrow) in March.
I’m not suggesting that a similar fate awaits Carvana, and I have no idea if the allegations are true. On the other hand, Hindenburg has a pretty good track record, in my view. With so many stocks to choose from, why own a name that is facing serious allegations from a reputable source? I’ll pass on Carvana.
At the time of publication, Ponsi was long TSLA.
