Investors have been nodding Tesla (TSLA)’s stocks higher over the last month in anticipation of two events.
It’s been a clear case of “buy the rumor” as shares are now 14% higher than they were just two weeks ago.
That move was made while the rest of the Magnificent Seven stocks have sat idle as investors appear to have grown tired of the large cap technology trade.
This morning, one of the Tesla “events” happened, and investors are spooked.
The next eight days are now more critical for Tesla’s October.
Let’s look at where the stock is likely happening and whether this is going to turn into a buying opportunity for the stock.
For the record, I’ve had a rule in place for more than 10 years when it comes to Tesla stocks… Never short Elon Musk.
I started bending that rule last year as Tesla investors started coming back to earth.
No, I don’t mean that the shares were falling – though they have been – instead I’m referring to tesla investors themselves.
For more than a decade, Tesla investors have been a died in wool group that never turned on the company or its CEO. That changed in 2023 as Elon Musk’s actions started to concern some investors.
On top of that, the company started to show signs that their successful end game in the EV industry may not continue to come as easy as it had in the past.
Competition from other companies, the lowering of tax credits and other incentives and other developments had Tesla acting like, dare I say, any other company.
Earlier this year, the stock looked to get its swing back.
But has the Street and investors gotten ahead of the recovery?
Tesla lost its shine with the analyst community. In 2022 the stock went from 86% of Wall Street analysts issuing a “buy” recommendation on the stock to the current 38% “buy” recommendations.
The swing in sentiment will work in Tesla’s favor as the company continues to improve, but for now those analysts remain cautious.
Think of it as those analysts, and investors, want to see Elon Musk and Tesla earn back their long-term trust.
Earlier in the year, the EV company was supposed to drop details and a demo of the much-awaited robotaxi project. Investors started buying on that rumor, and then it was delayed.
Last quarter’s earnings report held an update on the robotaxi project. Elon Musk informed investors that Tesla would be holding the robotaxi event on October 10.
Once again, investors started buying the stock in anticipation that this would be “the next big thing”.
That’s part of the 14% rally we’ve seen over the last two weeks.
Investors have also been buying Tesla ahead of their quarterly delivery numbers, released today.
This morning’s delivery numbers came in lighter than expected.
If you haven’t seen or heard, several analysts were increasing their expectations ahead of the release. At last count, there were three analysts raising their expectations as of last week.
The expected number: 463,310 vehicles. Tesla’s vehicle delivery for the third quarter: 462,890 vehicles.
The irony, the vehicle numbers missed by 420, one of Elon Musks favorite numbers.
It makes you start to wonder if Elon is playing games with a $780 billion company.
Nonetheless, investors aren’t playing games with the stock this morning as sellers have shaved 6% from the stock’s value in the first hour of trading.
The delivery numbers were less than expected.
That sets the stock up for a must-win next week.
On October 10, Tesla will host the “We Robot” event at Warner Brothers Studios in Burbank California.
Musk has hyped this event as the largest in the last ten years for Tesla, meaning that investors are buying the news ahead of the 10th.
A few of the larger banks have weighed in that they expect the event to only provide an update, not a final product.
If that’s the case, those investors buying ahead of the event are likely to “sell the news”.
It puts Tesla shares in a must win situation.
For those curious, the Cybertruck rollout was the last similar product introduction. The truck was unveiled on November 21, 2019.
Like today, Tesla shares rallied 15% higher over the two weeks leading into the unveiling. Shares lost about 8% after the Cybertruck’s debut.
In one word, “don’t”.
Tesla’s recent rally took it to the top of the same range that the stock inhabited during July and August.
Following that range, shares of Tesla are likely to retrace to the $200 price, which is also where the stock’s 200-day moving average sits to provide support.
At that $200 price, the stock begins to look attractive from a long-term perspective with Tesla’s 12-month price target at $350.
Keep in mind that the robotaxi event is just another warm-up for the stock’s earnings report set to be released on October 16.
The combination of the robotaxi event and the company’s third quarter earnings results has the potential to cause a larger selling spree for Tesla. This is since the company has missed its earnings target four of the last quarters in a row.
A revenue decline from 47% year-over-year growth to the current 2.3% also has the company on a tight leash.
The only reason that the company isn’t trading another 20% lower after its last report is the frenzy that Elon Musk has created for the robotaxi event next week.
Like I said, next week is a must win situation for the company.
Investors are often wise to resist buying any stock ahead of these type of events.
Relax, watch the show for free and then decide if Tesla is worth the recent hype.
