Tesla Inc.’s dismal sales report on Tuesday, coupled with persistent selling pressure from traders in recent months, has sent its stock hurtling toward a critical juncture, spelling trouble for investors.
The electric vehicle titan’s shares have plummeted more than 33% since the start of the year, emerging as the Nasdaq 100 Index’s worst performer and the S&P 500 Index’s second-worst. With prices nosediving from around $400 in January 2022 to a meager $166 and still dropping, technical analysts are eyeing the pivotal $150 mark, anticipating whether the stock can muster crucial support.
Matt Maley, chief market strategist at Miller Tabak + Co., emphasized the significance of this level, pointing to its alignment with previous lows and a prolonged downward trend channel. He underscored the pivotal nature of whether Tesla can maintain this level in the face of mounting challenges.
Much of Tesla’s recent struggles stem from concerns surrounding dwindling demand for electric vehicles (EVs). Its abysmal first-quarter delivery figures, falling far below even the most pessimistic Wall Street forecasts, have only exacerbated these worries. The stock’s 4.9% decline on Tuesday underscores the gravity of these concerns, serving as the primary driver behind the Nasdaq 100’s notable 0.9% drop.
Despite the recent downturn, some voices on Wall Street perceive a potential buying opportunity emerging. Mark Newton, global head of technical strategy at Fundstrat Global Advisors, suggests that the bearish sentiment may have reached an extreme, making Tesla increasingly attractive for contrarian investors eyeing short-term support levels.
Nevertheless, Tesla’s lofty market valuation continues to loom large, trading at approximately 59 times forward earnings, albeit down from previous highs. The company’s struggle lies in convincing investors of sustained demand for its vehicles amid growing competition and consumer hesitancy towards premium EVs, especially given lingering concerns about infrastructure and depreciation.
As the EV market slows, Tesla faces intensified pressure, exacerbated by its exclusive focus on electric vehicles. With a market capitalization dwarfing traditional automakers like General Motors and Ford, Tesla’s margin for error narrows significantly, leaving little room for missteps.
David Mazza, chief strategy officer at Roundhill Investments, echoes concerns about Tesla’s uncertain trajectory, highlighting potential support levels but acknowledging the absence of a compelling valuation argument in the current climate, particularly amidst downward revisions in future earnings and revenue projections.
