Tesla's stock price has increased by 100% since January's lows. Is a downturn imminent now?

On Thursday, Tesla Inc. shares doubled from their January lows, aided by a growing appetite for growth and technology firms and evidence of a revival in demand for its electric vehicles.

New York's closing price of $207.32 was up 3.0% from the stock's intraday low of January 6. In 2022, the stock price decreased by 65 percent.

Riskier growth equities, severely battered down in 2018 due to fears of increasing interest rates and a recession, have made a big rebound in 2023 as the economy has returned and investors wager the Federal Reserve's aggressive rate-hike cycle is reaching its conclusion. Moreover, Tesla's profits from last month and a slew of favorable news stories on tax rebates for electric vehicles have boosted the company's stock price.

Eric Schiffer, chief executive officer of Patriarch Organization, a Los Angeles-based private equity, stated, "Tesla is climbing so rapidly because the market believes the Fed will come to the rescue." He stated that strong fourth-quarter earnings and "price cuts to turbocharge demand" also helped.

The Biden administration announced in early February that it would increase the recently updated electric car tax credit to include SUVs costing up to $80,000. Analysts view this as a plus for Tesla. Separately, the corporation has implemented a minor price increase due to an increase in demand for its automobiles following January's significant price reduction.

Still, Tesla's year-to-date gains of 68% dwarf, which is up 13%, and the NYSE FANG+ Index, which is up 28% in 2023. Given Tesla's popularity among individual shareholders, a recent flurry of speculative trading in which retail investors rushed to purchase some of their favorite equities might explain a portion of this optimism.

A senior vice president of research at Vanda Securities named Marco Iachini said that this year, Tesla had been the main thing people have been looking to buy. Even though it's not unusual for retail investors to buy the stock, since Tesla is "an ultimate retail favorite," Iachini added that the persistence and the flows are surprising.

Iachini said that the recent "hunger" for Tesla stock could be due to the desire to chase it higher and make up for losses caused by the stock's sharp drop over the past year. According to Vanda, this week, 33% of all net purchases of US securities were made in Tesla alone.

Analysts at Vanda noted that a lot of retail investors are buying the stock before the company's investor day on March 1, when Musk is expected to reveal the third version of his "master plan."

The electric vehicle maker's shares are still down 49% from their all-time high of $409.97, which was reached in early November 2021, despite the crazy rise in January. Some investors say that the worst may be over for Tesla, but others say to be careful, especially since there is still a chance of a recession and the fast growth of the EV industry is expected to slow soon. Still, people are not sure about the company's newest model, the Semi heavy-duty truck.

The trading stock is just above the average analyst price target tracked by Bloomberg, which suggests that Wall Street doesn't see much more upside. The relative strength index, a technical measure of whether or not a stock is overbought or underbought, shows signs of overbuying, which markets usually see as a sign that prices are about to go down.

Tesla shares could continue to increase until the end of the first quarter or at the beginning of the second quarter, when "signs of a possible hard landing may again cut valuation," said Patriarch's Schiffer.

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