Tesla stock is ‘oversold but too early to buy’: Fundstrat

The start to 2023 was brutal for Tesla (TSLA) investors as the stock hit yet another multi-year low.

After a truly one hell of a 2022, Tesla investors are looking for something positive to hold on to that could be viewed as bullish.

But they’re not getting anything bullish at least from a technical standpoint right now.

Tesla “remains sharply bearish near-term and while oversold has shown no sign of bottoming out,” Mark Newton, Fundstrat’s head of technical strategy, said 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 below 100 by January 2023 gains before stabilizing and bouncing.”

Using tools like the daily RSI (Relative Strength Index) and TD Sequential, Newton theorizes that Tesla “is likely to be higher for the first six months of the year before weakening in the fall of 2023.” (He stubbornly sees short-term weakness in March as well.)

While highly technical, Newton’s analysis outlines additional challenges facing Tesla bulls, in addition to fundamental issues such as demand concerns or continued distractions from CEO Elon Musk and his Twitter foray.

Those demand concerns came to a head yesterday as Tesla reported a major failure in fourth-quarter deliveries. This led to analysts like JPMorgan’s Ryan Brinkman lowering its price target to $125 from $150.

“Beyond the impact on 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 believing that the company is likely to grow [unit volumes]’ Brinkman said in a note to customers yesterday. “We have questioned the company’s ability to sustain that growth rate.”

Brinkman’s concern is echoed on Wall Street, where analysts are questioning whether Tesla can meet its long-term delivery growth target of 50% annual growth. If that growth rate can’t be sustained, Tesla’s lofty valuation will have to come down to reflect traditional automakers, which have had much more modest growth and lower profit margins.

The story goes on

In a note to investors today, Wedbush’s Dan Ives spelled out these demand concerns, writing that yesterday’s delivery numbers left “investors with more questions than answers about the Tesla story with global demand.”

And while Ives thinks investors shouldn’t give up on Tesla just yet, he notes that it’s a “fork in the road” for Tesla – and Musk must now go into damage control mode to chart a realistic vision for growth or more “brutal.” Pain’ will come for already scarred long-term investors.

Pras Subramanian is a reporter for Yahoo Finance. you can follow him Twitter and further Instagram.

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