Brand new Tesla cars sit on a truck outside of a Tesla dealership on April 26, 2021 in Corte Madera, California.
Justin Sullivan/Getty Images
Tesla stock is having a rough go since the electric-vehicle pioneer reported first-quarter earnings in the afternoon of April 26. The weakness has investors, and traders, wondering where the bottom might be.
Tesla (ticker: TSLA) stock is down for the fifth trading day out of the past six. Shares managed a gain on Friday after a positive read-through from STMicroelectronics (STM.France) earnings. STMicro increased its sales guidance for a product predominantly bought by Tesla. But that positive tidbit turned out to be only a blip.
Shares are down 3.3% to $662.57 in Tuesday afternoon trading, and have dropped about 10% from the April 26 closing level of more than $738 a share. The S&P 500, for comparison, is down about 1% over the same span. The Dow Jones Industrial Average is roughly flat.
What’s more, Tesla stock is now just below its 50-day moving average of about $684 a share. Technical traders use moving averages and other indicators to estimate investor sentiment and predict the direction of the stock over short spans.
Closing below the 50-day moving average could bring the 200-day moving average into play. That is below $600 a share, down another 10% from recent levels, but the stock might find support before hitting that.
That’s because Tesla stock is starting to look oversold when considering other technical metrics, such as relative strength. Such technical indicators look at the number and magnitude of gains and loss for a stock or an index. When stocks are oversold it can mean, to technical traders, that all the bad news is priced into a stock.
Based on those factors, traders might look for a bounce to about $710 if the stock turns around.
Technical factors typically mirror what’s going on with a stock, fundamentally. For Tesla, investors weren’t thrilled with recently reported earnings. Better-than-expected regulatory credit sales and a gain on Bitcoin trading accounted for most of the reported earnings beat. Analysts were looking for earnings per share of 80 cents, and Tesla reported 93 cents in adjusted EPS.
Meeting earnings, however, isn’t good enough for Tesla stock which is up more than 300% over the past 12 months. What’s more, reports that German production might be delayed are weighing on shares this week. Tesla didn’t respond to a request for comment about the German facility it is building near Berlin.
Longer-term investors should be ready for Tesla stock to be rangebound for a few weeks for a few reasons. The company is still growing, earning money and generating positive cash flow, but investors want to see resolutions of some of the recent overhangs as well as new catalysts, such as federal tax credits or a start up of new production to take shares higher.
It doesn’t help, of course, that the Nasdaq Composite is down 2.6%. Inflation concerns are back. Warren Buffett talked about rising inflation at the Berkshire Hathaway (BRKb) annual meeting, and the prices-paid index for U.S. manufacturers hit almost 90 Monday. A level of 50 indicates growth. A reading of 90 is off the charts.
Write to Al Root at [email protected]
