Al Root

Tesla stock fell while the market rallied on Friday. That makes Monday an interesting test of the stock's recent rally.

Shares of the electric vehicle maker dropped 3.5% on Friday, closing at $421.06. The S&P 500 rose 1.1%.

There wasn't a great reason for the divergence. "To me, [ Tesla stock] was wildly overbought and long hedge funds needed a reason to take some profits," says Future Fund Active ETF cofounder and Tesla shareholder Gary Black.

"Overbought" is a trading term that essentially means the stock has gone up a lot quickly. When that happens it can be a sign a lot of good news is reflected in stocks and there aren't many buyers left to push prices higher. Some profit-taking is natural -- especially considering the rally.

Coming into Monday trading, Tesla stock was up about 69% year to date and about 67% since the Nov. 5 election. Shares were also down about 12% from an all-time closing high of $479.86 on Dec. 17.

Tesla stock rebounded 3.2% to $434.29 in early trading Monday while the S&P 500 and Dow Jones Industrial Average futures were 0.1% and 0.3%, respectively.

No matter what happens in the last few days of the trading year, 2024 will have turned out quite well for Tesla investors. It's their reward for enduring volatility. Don't forget, Tesla stock bottomed out below $$140 a share in April.

Still, investors would like to see momentum continuing into year-end, head of Tesla's fourth-quarter delivery report due on Jan. 2. Wall Street expects Tesla to deliver a little more than 500,000 vehicles, according to FactSet, a record for any quarter. Tesla needs to deliver about 515,000 to grow deliveries in 2024 compared with 2023.

Tesla delivered 1,808,581 vehicles in 2023. It delivered 1,293,656 in the first three quarters of 2023, down about 7% year over year.

Write to Al Root at allen.root@dowjones.com

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December 23, 2024 04:22 ET (09:22 GMT)

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