Tesla (TSLA) Stock: Cathie Wood Buys $15M as Price Tumbles 3.8%

TLDR

• Tesla shares declined 3.8% to $406.01 on Wednesday as valuation worries dominated despite beating Q4 earnings expectations
• The company reported $0.50 EPS beating $0.45 estimates with $24.90 billion revenue topping forecasts by $150 million
• P/E ratio approaching 400 sparked selling pressure while recent analyst downgrades added to negative sentiment
• China sales climbed 9% year-over-year and Tesla invested $2 billion in xAI for AI development initiatives
• ARK Invest purchased $15 million in shares while company insiders sold $53.5 million worth over three months

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Tesla stock fell 3.8% on Wednesday despite posting fourth quarter results that exceeded Wall Street expectations. Shares closed at $406.01 with trading volume jumping 15% above the daily average.

Tesla, Inc., TSLA

The electric vehicle maker reported earnings per share of $0.50, beating analyst estimates of $0.45. Revenue came in at $24.90 billion, surpassing forecasts of $24.75 billion.

But investors focused on valuation instead of fundamentals. Tesla’s price-to-earnings ratio has climbed near 400, creating concerns about downside risk.

At that multiple, even minor disappointments can trigger sharp selloffs. The stretched valuation became the dominant narrative as shares dropped throughout the trading session.

Wall Street Divided on Path Forward

Analysts remain split on Tesla’s outlook. The stock carries an average “Hold” rating with a consensus price target of $403.92.

That target sits just below Wednesday’s closing price. Morgan Stanley assigned a $415 price target with an “equal weight” rating in late January.

Royal Bank of Canada maintained an “outperform” rating with a $500 target. Melius Research issued a $520 price target with a “buy” rating.

Recent downgrades have pressured the stock as some firms question the premium valuation. Competition from Waymo’s expanding robotaxi operations adds another layer of concern.

Waymo secured fresh funding and accelerated its autonomous vehicle rollout. This development threatens Tesla’s positioning in the self-driving market.

China Sales and AI Investment Provide Bright Spots

Tesla saw positive momentum in China with wholesale sales rising 9% year-over-year in January. The growth in Tesla’s largest market provides a revenue boost as other regions slow.

The company announced a $2 billion investment in xAI for artificial intelligence development. The move signals deeper integration between Tesla’s vehicle technology and AI capabilities.

Bulls view the xAI investment as proof of Tesla’s commitment to autonomous driving technology. The partnership could create synergies across both companies.

Cathie Wood’s ARK Invest bought 35,766 Tesla shares worth approximately $15.09 million on Wednesday. Wood has a history of adding positions during price declines.

Her purchase came as shares fell nearly 4% during the session. ARK made the buy through its Space Exploration ETF.

Insiders told a different story with $53.5 million in stock sales over 90 days. Director James Murdoch sold 60,000 shares in early January for $26.7 million.

Director Kimbal Musk sold 56,820 shares in December for $25.6 million. Insiders currently hold 19.90% of outstanding shares.

Institutional investors own 66.20% of the company. Vanguard Group increased its position by 2.6% in the fourth quarter.

Tesla maintains strong financial metrics with a debt-to-equity ratio of 0.08. The current ratio stands at 2.16 with a quick ratio of 1.77.

Return on equity reached 4.86% while net margin came in at 4.00%. Revenue for the quarter declined 3.1% compared to the prior year period.

Analysts project Tesla will deliver $2.56 in earnings per share for the full fiscal year.

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