Tesla (NASDAQ:TSLA) was one of the best performers in 2020. In 2020, the stock has mostly been range-bound. However, the stock remains quite overvalued and there are indications that it could fall back to Earth in the coming months.The combination of the stimulus, Fed policy, and lockdowns was a potent combination that led to extraordinary moves in many growth and momentum stocks in 2020. One of the most notable of these stocks was Tesla (TSLA), which climbed by 1,185% between the March 2020 stock market bottom and its peak in mid-January.
Since January TSLA and many other growth stocks retreated, as money flowed into value and cyclical stocks due to rising interest rates and increasing optimism about the economy returning to normal. However, over the last couple of months, many technology and growth stocks have been rallying and recovered the bulk of their losses, with a handful even making new highs.
TSLA is up 25% since mid-May and bulls are optimistic shares will continue climbing higher. I am not one of those bulls. I view the recent rally in TSLA as an opportunity for investors to take a short position in the stock. The major vulnerabilities that I see in Tesla are slowing sales in China, slowing sales growth as competitors are launching new EV models and some of CEO and founder Elon Musk’s allure wearing off.