Question

In: Finance

1. Research a recent example of a large % move in the price of a specific...

1. Research a recent example of a large % move in the price of a specific stock (either up or down). Explain what you think caused the large change in valuation. Do you think the stock price move was justified, or was it an overreaction? Defend your opinion.

Solutions

Expert Solution

Current large move in a stock could be exampled through move in Tesla which drove it from almost 900 to 1700 within a week and it was almost 90% of the move.

I think the sudden change in valuation could be attributed to sales figure which has been reported by Tesla and which has increased dramatically on the higher side quarter on quarter so there was a high level of optimism among the investors and they went on to buying the share euphorically.

No,I do not think this is stock price move was justified because this was an overreaction and the share fundamental is not that strong still because it is not able to make consistent profits and this is almost trading at 130 Times price to earnings to the valuation of 2022.

I think that this is an overreaction and this is an euphoric movement which can be a trap for many years because the share could have made a top at these levels because there is a high irrational movement which is not justified by fundamentals.


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