In the wake of Tesla Inc.’s dismal sales report and persistent trader sell-offs, the company’s stock price is hurtling towards a crucial juncture for investors. With a staggering 33% decline since the beginning of the year, Tesla finds itself as the worst performer in the Nasdaq 100 Index and the second-worst in the S&P 500 Index. Currently trading at $166 and on a downward trajectory, analysts are closely monitoring the $150 level to assess potential support.
According to Matt Maley, chief market strategist at Miller Tabak + Co., this level not only marks the low from April last year but also delineates the bottom of an eight-month downward trend channel. The stock’s ability to hold or breach this level will be pivotal in shaping its trajectory in the days and weeks ahead.
The recent sell-off underscores concerns about declining demand for electric vehicles (EVs). Tesla’s disappointing first-quarter delivery figures, which significantly missed even the most conservative Wall Street estimates, have amplified these concerns. The subsequent 4.9% drop in the stock price on the day of the announcement further exacerbated its woes, making it the primary driver of the Nasdaq 100’s 0.9% decline.
Despite the substantial decline, some on Wall Street perceive an opportunity emerging. Mark Newton, global head of technical strategy at Fundstrat Global Advisors, suggests that the shares may be nearing an attractive entry point, with short-term support lying at the March lows of $160.50. A further decline to the range of $152-$155 could present an enticing counter-trend buying opportunity.
Yet, even amidst the dismal first-quarter performance, Tesla maintains a lofty market valuation, trading at approximately 59 times forward earnings, albeit lower than December’s figure of 66 times.
Looking ahead, the direction of Tesla shares remains uncertain. While the intense sell-off may signal a potential buying opportunity, the substantial variance between first-quarter deliveries and analysts’ projections suggests that Wall Street’s expectations may need further adjustment. Profit expectations for 2024 have already plummeted by 48% over the past year, with revenue estimates down by 19%.
Tesla’s current struggle lies in convincing investors of sustained demand for its vehicles to justify its ambitious growth projections and towering market capitalization. As consumer preferences shift towards cheaper gas-powered alternatives, the challenge of finding buyers willing to pay a premium for EVs intensifies, compounded by concerns surrounding charging infrastructure, battery range, and resale values.
This existential challenge is further exacerbated by Tesla’s exclusive focus on EVs, leaving it more vulnerable to the slowdown in the EV market compared to traditional automakers. With a market capitalization of $531 billion, Tesla operates under minimal margin for error, especially in contrast to competitors like General Motors Co. and Ford Motor Co., with market valuations of $52 billion and $53 billion, respectively.
David Mazza, chief strategy officer at Roundhill Investments, highlights the technical support levels for Tesla shares, pointing to the April 2023 lows around $153.75. However, Mazza underscores the absence of a compelling valuation argument, particularly amidst downward revisions in forecasts for the upcoming quarters.