Tesla stock tumbles toward existential levels in latest fiasco

(Bloomberg) — Tesla Inc’s disastrous sales report on Tuesday and a massive sell-off of the stock by traders in the months leading up to the report sent the company’s shares tumbling to levels critical to investors.

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The electric-vehicle giant’s shares have fallen more than 33% this year, making it the worst-performing stock in the Nasdaq 100 and the second-worst performer in the S&P 500. As of January 2022, the stock was trading at around $400. The price is currently $166 and falling. As a result, technical analysts are watching the key $150 level to gauge whether the stock will find much-needed support.

“This level is not only the low from last April, but it is also where we found the bottom of the eight-month downward sloping trend channel,” said Matt Maley, chief market strategist at Miller Tabak + Co. The coming days and weeks for stocks will be extremely important. “

Much of Tesla’s recent losses reflect concerns about weak demand for electric vehicles. The company’s dismal first-quarter deliveries, which were even a mile below Wall Street’s lowest estimates, only heightened those concerns as it reported its first year-over-year sales decline since 2017. In the early days of the COVID-19 pandemic, the stock closed down 4.9% on Tuesday due to this news, becoming the largest contributor to the 0.9% decline in the Nasdaq 100 so far.

With the latest decline, some on Wall Street say the stock is starting to show signs that the sell-off has reached its limit.

Mark Newton, global head of technical strategy at Fundstrat Global Advisors, said: “It feels like a lot of the bearish sentiment is entrenched and we’re approaching a very good risk-reward entry point.” “Support in the short term lies in March.” The low of $160.50, here That could push prices to $152-155, which would make Tesla quite attractive for dip buying from a counter-trend perspective. “

Despite Tesla’s poor performance in the first quarter, the company’s market valuation remains high. The stock trades at about 59 times forward earnings, down from about 66 times in December.

From here, the question for investors is where Tesla’s stock price will go, and it’s not easy to figure out.

Yes, the sell-off has been intense, which suggests it might be time to consider buying. But the huge disconnect between first-quarter deliveries and analysts’ expectations suggests Wall Street’s expectations may need to fall further, which would push current valuations lower. Profit expectations for 2024 have already fallen 48% over the past 12 months, while Revenue estimates fell 19%.

Tesla’s current existential woes have led investors to believe there’s still enough demand for its cars to meet the aggressive growth forecasts that underlie its massive market capitalization. At a time when Americans are opting for cheaper cars even among gasoline-powered offerings, finding consumers willing to pay a premium for electric vehicles is proving difficult, especially when considering the charging ecosystem, battery range, and used car value. While waiting for questions.

That explains why short interest in the stock hit a yearly high of 3.9% of the free float earlier this week, according to S3 Partners.

While slowing growth in electric vehicles is a problem for all automakers, Tesla has been affected more severely because it doesn’t make gasoline-powered vehicles. Its massive market capitalization ($531 billion as of Tuesday’s close) leaves little room for error. For example, car companies have a market valuation of $52 billion, while Ford Motor Co. has a market valuation of $53 billion.

“Based on the technicals, we may see support for the stock price at the April 2023 lows, around $153.75. If the company is unable to sustain these levels, there won’t be much support until the 2022 lows. ,” said Chief Strategy Officer David Mazza. Tirhill Investments. “The challenge is that there is no valuation thesis yet, especially with lower forecasts for the coming quarters.”

—With the help of William Maloney.

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