The start of 2023 was a brutal one for Tesla (TSLA) investors, with the stock again hitting multi-year lows.
Coming after a truly hellish 2022, Tesla investors are looking for anything positive to grasp on that could be considered bullish.
But they are not going to get anything bullish, at least from a technical point of view at the moment.
Tesla “remains strongly bearish near-term, and despite being oversold, has not shown evidence of having bottomed out,” said Mark Newton, Head of Technical Strategy at Fundstrat in a note to clients yesterday. “Based on a combination of daily and weekly cycles…I believe TSLA still has the potential to weaken to under 100 into its January 2023 earnings before any stabilization and bounce.”
Using tools like daily RSI (relative strength index) and TD Sequential, Newton surmises that Tesla “likely will be higher the first six months of the year, before weakening into Fall 2023.” (He does, tough, see short term weakness in March as well.)
While Newton’s analysis is heavily technical, it outlines additional challenges facing Tesla bulls in addition to fundamental issues like demand concerns, or continued distractions from CEO Elon Musk and his Twitter foray.
Those demand concerns came to a head yesterday when Tesla reported a big miss for Q4 deliveries. This lead to analyst like JPMorgan’s Ryan Brinkman to cut his price target to $125 from $150.
“Beyond the impact to near-term financials, another implication we see from 4Q’s combination of softer than consensus volume and pricing is the impact on the stock’s growth narrative which has allowed many investors to believe the company is likely to grow [unit volumes],” Brinkman said in a note to clients yesterday. “We have questioned the company’s ability to sustain this rate of growth.”
Brinkman’s concern is one echoed on Wall Street, where analysts are questioning whether Tesla can maintain its long-term delivery growth rate target of 50% compound annual growth. If that growth rate can’t be maintained, Tesla’s high valuation will have to come down to mirror traditional automakers, who have had much more modest growth, and smaller profit margins.
In a note today to investors, Wedbush’s Dan Ives laid out that demand concern, writing that yesterday’s delivery numbers leave “investors with more questions than answers on the Tesla story with global demand.”
And while Ives believes investors shouldn’t bail on Tesla just yet, he does note it is a “fork in the road” moment for Tesla—and Musk must go into damage control mode now to lay out a realistic vision for growth, or more “brutal pain” is to come for already scarred long-term investors.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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Source: https://finance.yahoo.com/news/tesla-stock-is-oversold-but-its-still-too-early-to-buy-fundstrat-162025582.html