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When I grow up, I want to be a stock analyst. Other than being a weather forecaster on TV, there is no profession that pays people so much to be wrong so often. I subscribe to Bloomberg because it gives me access to lots of news about electric transportation — particularly Tesla — and developments in clean energy, but it also focuses on what is hot and happening in the stock market, where volatility makes millionaires out of many who develop a skill for riding the never ending waves that gloom and euphoria create among investors.
Here’s a recent example of a Bloomberg piece that purports to address where Tesla stock is headed in the next few weeks. Most CleanTechnica readers, who are all above average, are aware that Tesla has been experiencing a bit of a sales slump over the past year or so. The company that once predicted it would grow 50 percent a year forever — a literal impossibility — was doing just that for a while. It opened new “gigafactories” (aka factories) in Austin, and Shanghai, and Grünhiede. There was talk of a second factory in Europe, one in India, and another in Mexico. Then interest rates went up, subsidies in China (and other countries) went down, and suddenly Tesla found itself delivering fewer cars than it had in past quarters.
An End To Tranquility For Tesla Stock?
Late last week, Bloomberg contributor Esha Dey wrote, “A rare streak of tranquility in Tesla shares is about to end, as investors brace for three crucial events over the coming six weeks that could bring back the wild swings often associated with the electric-vehicle maker’s stock.”
What lies ahead, of course, are the delivery statistics for the second quarter due out this week, and then the company’s Q2 earnings call later this month. Either or both could be disappointing, sending the stock lower. Also on the horizon is the reveal Elon Musk has scheduled for August 8, which everyone assumes will be an announcement that Tesla has cracked the code on robotaxis. Options trading data show that investors are positioning for a move of around 15% either up or down through mid-August, according to data compiled by Citigroup Inc.
But, Bloomberg says, strategists warn the shares could see much more turmoil than that. “Tesla options are underestimating volatility across these three upcoming catalysts,” Citi’s equity trading strategist Vishal Vivek said in a note to clients. These events have triggered big stock moves in the past, including for Tesla suppliers and other EV makers, Vivek said. “Considering how important Tesla’s deliveries have been in the past, how much the stock moves on earnings, and the potential for a new product line announcement at the robotaxi day, the 15% move implied between now and the August 16 expiry seems low,” he added in an interview.
Shares in Tesla have gyrated wildly over the past 18 months. Those who dove in when the stock was near $100 a share are jubilant. Those who got on board when it was closer to $300 a share are naturally distraught. Tesla shares have been trading within a pretty tight range since early May, but the stock remains below its 200-day moving average — a longer term trend indicator that traders pay close attention to — but a sharp move higher this week signals a potential for change. That is boosting optimism among some investors. “While the intermediate term period of consolidation and downtrend remains intact for Tesla since 2021, the short-term picture has begun to improve markedly in the last two months,” Mark Newton, global head of technical strategy at Fundstrat Global Advisors, told Bloomberg.
Estimates of how Tesla did in the second quarter based on the number of cars delivered have been coming down rapidly, along with expectations for both profit and revenue. Yet some analysts argue that the trouble Tesla has been experiencing selling its vehicles is widely understood, so that barring a heavy miss, the shares can actually rally once the figures come out, especially if the Q2 numbers are not quite as bad as some expect them to be.
The Buildup To August 8
Traders have taken an increasingly bullish stance on where Tesla may find its shares toward the end of the summer. Options traders have bid up the price of calls that eye a 10% rally and expire in two months relative to the cost of equivalent puts. That dynamic signals rising interest to chase the stock higher, coupled with fading desire to hedge a dive down.
The real test for the stock, however, will be the expected unveiling of the Tesla robotaxi in August. (Please see Zachary’s recent article on robotaxis for more context about whether they really are the next wave in transportation.) As Elon Musk tries to re-position Tesla as an artificial-intelligence company rather than just an EV maker, a lot is depending on that event. Tesla shares currently command a hefty premium that’s towering over all other mega-cap technology stocks, even Nvidia. That pricey valuation is underpinned by investors’ faith in Musk’s ability to successfully transform Tesla into a dominant AI player. The robotaxi reveal will be a pivotal step in that direction, Bloomberg suggests.
As such, correctly predicting how the push and pull of these catalysts will play out over the coming weeks is tough. But technical strategists recommend watching some key levels to understand whether the stock is breaking out in one direction or the other. “On the upside, a rally above the $206 resistance, which is a convergence of its February peak and the 200-day moving average, would mark a breakout and act as the next incremental positive for the stock’s trend,” said Ari Wald, head of technical analysis at Oppenheimer & Co. That would mean a 4.3% jump from Tesla’s Thursday close of $197.42. On the other hand, any decline that takes the shares below their shorter term trend line of the 50 day moving average will be noteworthy. That would require an 11% drop from the stock’s last close for that to happen.
While it is hard to predict what the next few weeks have in store for Tesla, “what I can say with more certainty is that these events are likely to end the recent period of relative calm in the stock price,” said Adam Sarhan, founder and CEO at 50 Park Investments. “Positive surprises could fuel a rally, while disappointments might lead to a selloff.” That’s pretty much it in a nutshell.
The Takeaway
Around the smoothie bar at CleanTechnica global headquarters, the feeling is one of caution. We have been through this many times and understand that shares in Tesla are like a hot air balloon kept aloft by faith in Elon Musk’s ability to continue moving fast and breaking things. We do not offer stock advice, and as many of us have lost money betting on Musk as have profited. That being said, Tesla stock is worth far more than the shares of every other automaker on Earth, and that is due entirely to people’s confidence that Musk will continue to pull rabbits out of the hat virtually forever. Such faith is laudable, but is Tesla stock really worth more than the next 5 major automakers’ stock combined? “We’ll see,” said the Zen master.
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