Let's Talk About Tesla

If you haven’t watched the latest Tesla (TSLA) deep dive, take a minute to check it out now.

In the video, I call for a target price of $100 per share, and I’m maintaining that view.

Here’s what happened last night. Tesla’s earnings report was worse than expected.

The company had its worst year-over-year revenue decline in more than 22 years. The company admitted that sales growth in the EV market is slowing and that their rivals have also been forced to make changes to pricing to adjust.

Earnings per share were $0.45 versus $0.51 expectations.

The numbers were bad. I’m sure you’ve seen. But the stock is now trading 13% higher in early trading activity as investors react to one thing… Hope.

You see, last night Tesla, more notably Elon Musk, announced that the company would accelerate the development of less expensive EVs that could start as soon as “early 2025, if not late this year…”  That news sent the stock flying high. And that’s the magic we warned could happen on Monday.

“Don’t short Elon Musk - at least not ahead of this report.”

That’s what I said and the magical “plan” that Tesla announced is why. Well, that along with the fact that the stock was set for a short-term “dead-cat bounce.”

The company didn’t deliver a “kitchen sink” quarter. Instead, they offered a hopeful outlook that once again has the “Church of Musk” in the aisles dancing to his music.

This isn’t the first time that this has happened, but things are a little different. Wall Street’s analysts haven’t rallied to the call. In fact, several of them are casting doubt on this plan. They’ve seen how these situations have played out in the past and appear to be taking a “wait-and-see” approach.

So, here’s what we do…

I mentioned that I had reduced my short position on Tesla ahead of the earnings announcement. This is why. From here, the stock will see a technical bounce, fueled by last night’s dose of “hopeium.”

This is where you remember something important…

Prices don’t lie.

Prices don’t feel.

Prices don’t hope.

Prices can reflect those and other sentiments, but they are still prices. And prices and their trends are the only thing you can count on when the fundamentals for a company are this much in question.

If you understand that, the next part is simple.

Tesla shares have a tough test at $175. That’s where the April highs for the stock sit as well as the stock’s bearish 50-day moving average.

tsla stock chart

Failure for the stock to break above that prices signals that the longer-term trend on Tesla shares is set to remain in place. That’s where I add my bearish puts again with a target for the stock to decline to $130.

The line to my target price of $100 won’t be a straight one, but any misstep from the company over the next three to six months will accelerate the process as those anointed bulls will slowly lose faith and turn into sellers.

 

 

 

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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