Tesla’s stock is no stranger to polarizing opinions, with passionate bulls and bears constantly debating its prospects. The company’s electric vehicles receive accolades for innovation and criticism for quality issues, while opinions on CEO Elon Musk range from adulation to skepticism. This dichotomy is reflected in Tesla’s stock price, which experiences significant volatility and is often a focal point of market attention within the S&P 500.
For instance, Tesla’s stock endured a tumultuous journey during the 2022 bear market, experiencing a sharp decline followed by a remarkable recovery that saw it more than double to its 2023 highs. However, the euphoria was short-lived as the stock subsequently faced significant downward pressure, plummeting by 44%. In 2024 alone, Tesla shares have already shed approximately a third of their value, underscoring the rollercoaster nature of its performance.
The recent sell-off in Tesla’s shares caught many investors off guard, particularly those who were optimistic about the company’s growth prospects driven by the expansion of new factories and the highly anticipated launch of its Cybertruck pickup. Despite these expectations, TheStreet Pro’s Bruce Kamich accurately predicted this year’s decline as early as January, and in February, he reiterated his bearish stance, warning investors to “avoid the long side of Tesla” due to the potential for further declines.
Kamich’s cautionary outlook has proven to be prescient, especially in light of Tesla’s disappointing full-year guidance released in February and the concerning first-quarter delivery numbers reported in April. The subsequent decline in Tesla’s share price prompted Kamich to update his forecast, including the issuance of a new price target. Given his track record of accurately anticipating Tesla’s stock movements, investors are advised to take heed of his insights and observations.
In summary, Tesla’s stock remains a focal point of contention among investors, with divergent views shaping its price trajectory. As the company navigates challenges and opportunities in the dynamic EV market, Kamich’s analysis serves as a valuable resource for investors seeking to navigate the volatility and make informed decisions regarding Tesla’s stock.
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Tesla profits from widespread EV adoption
Elon Musk’s influence on the electric vehicle (EV) industry cannot be overstated, as he has played a pivotal role in shaping its trajectory and success. Unlike previous efforts that primarily emphasized the environmental benefits of EVs, Musk’s approach focused on performance and luxury, revolutionizing the perception of electric cars.
Under Musk’s leadership, Tesla has developed a lineup of EVs renowned for their exceptional performance and cutting-edge technology. The flagship Model S Plaid, for instance, boasts acceleration from 0 to 60 miles per hour in under two seconds, setting a new standard for speed and agility in the automotive industry. Similarly, variants of the Model Y and Model 3 offer impressive acceleration, rivaling and often surpassing traditional luxury car brands such as Porsche, Mercedes-Benz, and BMW.
This performance-oriented mindset represents a significant departure from previous EV and hybrid efforts, which primarily prioritized fuel economy over performance. Musk’s strategic focus on delivering high-performance EVs has resonated with consumers, driving Tesla’s sales and earnings to unprecedented heights over the past five years.
The company’s financial performance speaks volumes about the success of Musk’s approach. Tesla’s revenue has skyrocketed from $21.5 billion in 2018 to over $96.8 billion in 2023, marking a more than fourfold increase. Moreover, Tesla transitioned from a loss of 38 cents per share in 2018 to earning $4.30 per share on a GAAP basis in 2023, underscoring its remarkable turnaround and profitability.
Wall Street has taken notice of Tesla’s meteoric rise, with the company’s share price surging by an impressive 657% since 2018. This exponential growth reflects investor confidence in Tesla’s innovative vision, disruptive technology, and Musk’s leadership prowess.
Tesla faces stiffening EV-demand headwinds
Investors who got in early on Tesla and weathered the ups and downs of its share price have undoubtedly reaped significant rewards. However, the picture looks less favorable for those who entered the market more recently.
Tesla’s recent struggles can be attributed largely to its own success, which has attracted fierce competition from established automakers eager to capitalize on the growing popularity of electric vehicles (EVs). Companies like Ford, General Motors, Mercedes-Benz, and Hyundai have entered the EV market with their own offerings, posing a formidable challenge to Tesla’s dominance.
In the fourth quarter of last year, total U.S. EV sales surged by 40% to reach 317,168 vehicles, with Tesla accounting for half of them. While this is a substantial figure, it marks a notable decline from Tesla’s 62% market share in the first quarter of 2023, as reported by Cox Automotive. This erosion of market share, coupled with broader challenges such as rising vehicle loan rates due to Federal Reserve interest rate hikes and consumers facing tighter budgets amid inflationary pressures, has created headwinds for Tesla’s growth trajectory.
In the fourth quarter, Tesla’s revenue saw only a modest 3% increase year-over-year, while its earnings per share plummeted by 40%. These disappointing financial results underscore the challenges the company is facing in maintaining its momentum in the face of intensifying competition and changing market dynamics.
The outlook doesn’t appear any brighter for Elon Musk and Tesla moving forward. The company’s first-quarter deliveries, reported on April 2, totaled 386,810 vehicles, marking an 8.5% decline compared to the previous year and a significant 20% drop from the fourth quarter of 2023. Analysts, who had already tempered their expectations, had anticipated 455,000 deliveries, according to data from LSEG.
Tesla’s price charts reveal new price target
Bruce Kamich, a seasoned technical analyst with over 50 years of experience, has a track record of accurately using price and volume charts to provide insights into stocks and markets. His recent analysis of Tesla’s stock paints a sobering picture for investors, especially those who are bullish on the company.
Kamich’s evaluation of Tesla’s daily and weekly charts reveals concerning trends. The stock has been on a downward trajectory since July, trading below both the declining 50-day and 200-day moving average lines. Moreover, indicators such as the daily volume histogram, On-Balance-Volume (OBV) line, and Moving Average Convergence Divergence (MACD) oscillator all indicate weakness, suggesting a lack of conviction in the stock’s upward movement.
In particular, Kamich highlights the importance of improving buy-to-sell day volume and positive MACD momentum for indicating a bullish trend. However, these indicators currently point towards further downside for Tesla’s stock.
The outlook from the point-and-figure (P&F) charts is equally grim. The daily P&F chart initially suggested a target of $150 in February, but this has since been revised lower to $143. The weekly P&F chart is even more bearish, indicating a downside target of $117.
While P&F charts are not infallible and do not provide timing information, they offer valuable insights into potential price targets. When coupled with Kamich’s analysis of price and volume charts, the overall sentiment is decidedly bearish, indicating limited upside potential for Tesla’s stock in the short term.
In light of these findings, Kamich advises investors to avoid the long side of Tesla (TSLA) and consider selling on any bounce. This represents a significant shift from Tesla’s previous reputation as a buy-and-hold stock, reflecting the current challenges and uncertainties surrounding the company’s future prospects.