Prediction: Tesla Stock Will Plummet Below $100 if the S&P 500 Enters a Bear Market
Tesla stock is vulnerable to a significant correction due to its lofty valuation.
Overview
The benchmark S&P 500 (SNPINDEX: ^GSPC) is hovering near a record high, but the risk of a sell-off might be rising due to the ongoing geopolitical tensions in the Middle East, the stubbornly high inflation rate, and the growing chance of an interest rate hike before the end of 2026.
The S&P 500 currently has a Shiller cyclically adjusted price-to-earnings (CAPE) ratio of 41.6, its highest valuation since the dot-com bubble in 2000. That makes the index especially vulnerable to downside, and if it were to enter a bear market by experiencing a 20% decline, many stocks with elevated valuations would likely also suffer sharp corrections.
Details
The S&P 500 last traded in bear territory during 2022 and 2023, which sent Tesla (NASDAQ: TSLA) stock plummeting by 75% to just $100. The electric vehicle (EV) giant recovered to set a new record high of $489 last year, but it's currently on the back foot once again. Here's why I predict it will fall below $100 if the S&P enters another bear market.
Source
Originally published at www.fool.com.