Tesla is the epitome of a battleground stock. Its electric vehicles readily receive applause or disdain, and its mercurial chief executive, Elon Musk, has more than his fair share of fans and foes.
The hit-or-miss nature of Tesla stock reflects the tug-of-war, given its one of the most volatile stocks in the S&P 500.
For instance, Tesla shares tumbled during the 2022 bear market. Then, they more than doubled from their lows to their 2023 highs. More recently, they’ve fallen out of favor again, dropping nearly 30% since mid-December.
The sell-off likely surprised many, given hopes for ever-growing electric vehicle sales, new factories, and the launch of the much-hyped Cybertruck.
However, Real Money Pro analyst Bruce Kamich wasn’t shocked. He correctly predicted in early January that Tesla stock would fall, writing that his analysis concluded that Tesla shares had “more risk than upside opportunity.”
Kamich recently updated his analysis, and given his track record, investors may want to pay attention.
Tesla CEO Elon Musk has seen Tesla’s shares trade incredibly volatilely over the past two years.
Tesla is the EV sales leader, but growth slowed in 2023
Tesla reimagined the electric vehicle market. Rather than designing vehicles for environmentalists, Elon Musk concentrated the car company’s efforts on building high-performance luxury cars.
The strategy worked. Its Model S Plaid outperformed top brands like Porsche, making it a fan of enthusiasts. It has since launched the highly popular Model Y, a crossover SUV, and the Model 3, a lower-cost sedan with high-performance roots.
The Model Y and the Model 3 are both offered in configurations that deliver eye-popping speed, with each able to go from zero to sixty miles per hour in under four seconds.
Musk’s focus on performance rather than economy has upturned the auto industry, arguably single-handedly setting EVs on a course to win away a significant share of auto sales from traditional internal combustion engine (ICE) vehicles.
Tesla has clearly profited from this approach. Its fourth-quarter revenue was $25 billion, and Wall Street analysts expect it will deliver $3.12 profit per share in 2024.
That’s impressive, but Tesla has recently become a victim of its success. The widespread interest in EVs has led major rivals, including Mercedes, Ford, and GM, to launch their own EV alternatives, and those vehicles are biting into Tesla’s market share.
According to Cox Automotive, total U.S. EV sales surged by 40% in Q4 to 317,168. Tesla accounted for half of all EVs sold in the quarter. However, that’s down from 62% in Q1 2023.
The loss in market share has happened despite Elon Musk cutting prices to spark sales. The combination of lower market share and lower prices has taken a stiff toll on the company’s financial performance, leading to anemic 3% year-over-year revenue growth and a 40% decline in profit during the fourth quarter.
Given that backdrop, it’s unsurprising that Tesla’s shares have taken a nosedive this year.
Tesla’s price charts result in a new price target
Kamich has used price and volume charts to analyze stocks or markets professionally for over 50 years. His technical analysis accurately forecasted that Tesla stock would reach $300 before declining to $193. Then, after a rally, it allowed him to accurately warn of the risk of downside in January.
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Kamich reconsidered Tesla’s daily and weekly charts on Feb. 1 for insight into what could be next for Tesla’s stock. He also used a daily point-and-figure chart to calculate a new price target. Unfortunately (if you’re a Tesla fan), Kamich thinks Tesla shares could still fall further.
“I can see an evolving bearish picture. The shares have weakened so far in 2024. Prices gapped lower in the middle of January and have not shown us signs of a bottom reversal. The popular moving averages have weakened, and now we can see a bearish dead or death cross-sell signal, with the 50-day line falling below the slower-to-react 200-day line,” writes Kamich. “The trading volume has been neutral, and the On-Balance-Volume (OBV) line is still pointed down. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line.”
On-balance volume is essentially a running total of up minus down volume, while MACD measures momentum.
Since up-day volume is poor relative to down-day volume and the MACD is negative, Kamich is cautious.
It doesn’t help that Kamich’s analysis of point-and-figure charts is also worrisome. Using a daily P&F chart, he calculates a Tesla stock price target of $150.
“Tesla is looking poised for further declines,” concludes Kamich. “Avoid the long side of [Tesla] TSLA.”