Tesla, Inc. (NASDAQ:TSLA) gets a fresh price-target cut from Wall Street
Barclays on Thursday became the latest Wall Street firm to lower its expectations for Tesla, citing concerns over underlying demand, profitability, and the skepticism that’s met CEO Elon Musk’s full self-driving plans.
“Model 3 demand is stagnating in the US, the company still doesn’t have a path to significant auto profitability and solar storage installations have declined sequentially over the past two quarters,” analyst Brian Johnson wrote.
“While Mr. Musk is pivoting to the remaining ‘hyberbull’ full robotaxi scenario, his efforts to spring excitement around Tesla’s full self-driving capabilities was broadly met with the appropriate skepticism,” he added.
It’s these developments, amounting to the higher likelihood of a “stall” in Tesla’s progress, that led Johnson to lower his price target to $150 from $192. That new target implies a 21% drop from current levels.
In its report, Barclays picks apart a theme that’s enveloped the cult of Tesla for years. The automaker has long been seen as a compelling growth story that investors have eagerly bought into, setting aside typical fundamental metrics like profitability and valuation for the chance at investing in a piece of the future.
Johnson, who maintained his “neutral” rating, expects investors to increasingly focus on fundamental issues that have cropped up in recent months, slamming the stock.
“We expect more investors to gravitate back to Tesla’s near-term fundamentals of demand, profitability, and cash generation, areas that are now more exposed as the blue pill thesis washes away,” he wrote, referencing the “blue pill” in the film “The Matrix” that allows a character, Neo, to see the universe in a state of blissful unawareness.
In contrast, the “red pill” would allow Neo to see the universe realistically.
“What’s left of the blue pill?” Johnson wonders, adding the “recent price action reflects shrinking confidence in the blue pill upsides, and a higher likelihood that Tesla is at best a niche automaker.”
“On Tesla, we think many investors had initially taken the blue pill, while we remained stubbornly in the red pill camp,” he said.
In recent months, even as Tesla unveiled both its long-awaited lower-cost Model 3 and Model Y crossover SUV, and executed a capital raise applauded by analysts, shares have plummeted to 2 1/2-year low.
Wall Street’s reaction has been swift and severe, with several critical reports from equity analysts emerging last week.
Morgan Stanley lowered its bear-case price target to just $10 a share after having cut its base-case target four times this year. Additionally, Bank of America Merrill Lynch said in a report that Tesla’s fundamentals are “deteriorating, specifically deliveries/production that are starting to stall.”
And last month the Wedbush analyst Dan Ives, a former Tesla bull, lowered his rating and said he could no longer “look investors in the eye” and recommend the stock at current levels.
The buy-side’s confidence in Tesla also appears shaken. Asset management giant T. Rowe Price, which not long ago was Tesla’s largest institutional shareholder, in the first quarter dumped most of its stake after already having reduced its position late last year.
Tesla is down 42% this year, trading near $192 a share.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 240.51.
The projected upper bound is: 208.07.
The projected lower bound is: 165.20.
The projected closing price is: 186.63.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 19.0473. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 23.49. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 22 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -80. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 12 period(s) ago.
Rex Takasugi – TD Profile
TESLA INC closed down -1.640 at 188.220. Volume was 22% below average (neutral) and Bollinger Bands were 79% wider than normal.
Open High Low Close Volume___
188.750 192.255 187.020 188.220 7,926,475
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 199.54 248.44 296.38
Volatility: 53 55 70
Volume: 15,337,695 11,273,230 9,602,366
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
TESLA INC is currently 36.5% below its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of TSLA.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on TSLA.O and have had this outlook for the last 33 periods. Our momentum oscillator is currently indicating that TSLA.O is currently in an oversold condition. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.