Tesla stock analyst delivers blunt warning

Investors are passionate fans or foes of Tesla’s electric vehicles, and its mercurial chief executive, Elon Musk, has spawned legions of supporters and detractors. As a result, Tesla is one of the stock market’s most volatile stocks.

For example, Tesla’s shares sold off sharply during the 2022 bear market before rebounding handsomely in the first half of 2023. The shares then sold off again in October before rallying into year’s end, likely leading many investors to wonder what’s next. 

Real Money analyst Bruce Kamich recently updated his analysis on Tesla stock. His recommendation may frustrate some investors.

Elon Musk’s Tesla is one of the stock market’s most loved and hated stocks.

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Tesla drives EV sales growth in 2023

Tesla’s focus on performance and luxury helped electric vehicles graduate from being niche cars that environmentalists own to mainstream cars owned by enthusiasts.

Its Model S Plaid has set lap speed records, and a performance mindset has carried over to other models, including the Model Y, the world’s top-selling SUV, and the Model 3 sedan, an under-$40,000 family car. 

Its two most affordable cars, the Model Y and Model 3, can both reach 60 miles per hour in under 4 seconds when outfitted with the performance package.

Related: Porsche issues the ultimate rebuttal against Tesla

The ability to pack that much punch into vehicles designed for four passengers has helped spark widespread interest in EVs as a viable alternative to the traditional internal combustion engine vehicles. 

As a result, EV sales growth, led by Tesla, has continued to exceed industrywide auto sales significantly.

According to Cox Automotive, total U.S. EV sales surged by nearly 50% in Q3 to 313,000, with Tesla accounting for half of all units sold. Tesla’s sales strength also appears to have carried over into the fourth quarter.

According to the company, Tesla produced 494,989 vehicles and delivered more than 484,507 vehicles in Q4, outpacing Wall Street’s estimate for it to deliver 483,000 vehicles. It delivered 1.8 million vehicles in 2023, up from 1.3 million in 2022, good for 38% growth in a year when total global sales are expected to have climbed only 8%, according to ING.

Although sales growth remains strong for the company, revenue and profit retreated last year because of price cuts to boost demand. Third-quarter earnings fell 37% to 66 cents a share as revenue rose 9%. Tesla reports fourth-quarter financial results Jan. 24.

Tesla’s price charts provide clues to what’s next

Kamich has analyzed price and volume charts for professional investors for more than 50 years. In 2023, his analysis correctly predicted that Tesla would rally to $300 before declining to $193, a particularly prescient forecast given that the shares bottomed in October at $194. 

More Business of EVs:

A full list of EVs and hybrids that qualify for federal tax creditsHere’s why EV experts are flaming Joe Biden’s car policyThe EV industry is facing an unusual new problem

Kamich evaluated Tesla’s daily and weekly charts on Jan. 2 to gauge what could happen to Tesla’s stock next. He also calculated price targets using daily and weekly point-and-figure charts. Unfortunately for Tesla fans, Kamich says Tesla stock could be heading lower. 

“Prices have made four unsuccessful upside attempts, starting with a high in July,” said Kamich. “Prices are trading just slightly above the declining 50-day moving average line and above the rising 200-day line. The On-Balance-Volume line has been stalled since July and looks like it ’rounded over’ in December. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but is crossing to the downside for a take-profit sell signal.”

On-balance volume is essentially a running total of up minus down volume while MACD is a momentum measure.

The fact that up-day volume isn’t significantly exceeding down-day volume makes Kamich think that sellers are in control right now. The shift in momentum lower is also a red flag that has him cautious.

“The charts and indicators of TSLA suggest more downside risk than upside opportunity,” concludes Kamich.

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