TradingKey - Tesla starts the 9th with $368.16 verified close on the 8th (3.98% gain on the reference $368.24). Price is continuing to rise in the channel, with a channel breakout level at $368.57. Price recently recovered from the July $297.57 low. The fundamentals present a mixed picture that is more complex than presented by the chart. European FSD approvals are expanding, negative free cash flow, and a loss of momentum in China are countered by the launch of limited operations of Cybercab in the U.S. and the expansion of approval of FSD in Europe.
Cybercab Is Now a Real Operating Business, but Still Tiny
As of the first of September, Tesla had 45 Cybercabs registered in Texas among 420 autonomous Tesla vehicles, while limited Cybercab rides had begun in Austin (cited in Reuters' Texas registration data). While this is a small operating fleet, the market now has the opportunity to evaluate an operating service as opposed to hearing just the promises of a future launch. The investment case hinges on the legal, geographic, and economic scale of the Cybercab service, without some slowing the service due to safety or certification issues.
NHTSA Probe Creates a Direct Regulatory Test
The biggest most recent concern is the self-certification of Cybercabs (around 1000 total) by Tesla to NHTSA. NHTSA has opened an investigation into Tesla’s self-certification of up to roughly 1,000 Cybercabs. The self-certification of vehicles without steering wheels, pedals, and mirrors raises the issue of whether Tesla can certify Cybercabs outside of the traditional exemption.
Even though the regulator hasn’t said that Cybercab is unsafe or illegal, this investigation is still important. This is because autonomy is now a big part of how people see Tesla’s value. Any slowdown in growth of the Cybercab service may change how quickly people think that the Robotaxi service will make money.
European FSD Progress Provides a Positive Counterweight
In Europe, Tesla won a significant regulatory decision on September 8, when Slovenia approved driving with FSD under supervision, making it the sixth country to do so. France is also conducting FSD testing and may be considering a broader approval in Europe later this month.
Having supervised-FSD approval in several more countries gives Tesla the opportunity to earn more money from software subscriptions with less new automobile sales.
There is a very important distinction to be made here. Supervised FSD approval is not the same thing as the approval of fully autonomous Cybercab.
Q2 Deliveries Recovered, but Profitability Did Not
While Tesla’s Q2 performance was marked by an impressive recovery in deliveries, performance on profitability remains worrisome. Revenues grew to $28.24 billion, a 26% year-over-year improvement, and vehicle deliveries grew to a record second-quarter 480,126, up 25% year-over-year.
The problem, as always, is the profitability. Gross margin (automotive, excluding regulatory credits) dropped to 16.3%, operating margin declined to just 1.4%, and operating profit fell by 57% year-over-year, to $398 million.
We have our answer on whether Tesla can recover deliveries. The bigger question centers on Tesla’s ability to bring back profitability in the context of simultaneously funding the Cybercab, AI compute, Optimus, Semi, energy, storage, and manufacturing.
Negative Free Cash Flow Raises the Execution Bar
While Tesla was able to generate $4.70 billion of operating cash flow in Q2, its capex hit $5.79 billion, resulting in negative free cash flow of $1.09 billion.
There are no concerns over liquidity as Tesla has $43.52 billion of cash, cash equivalents and short-term investments. The bigger issue is return on capital. Heavy spending, prior to proving the durability of earnings, is occurring on projects like Robotaxis and other AI initiatives.
China Is Still the Weakest Automotive Market Signal
Deliveries of Model 3s and Model Ys grew by 3.6% year-over-year to 86,166 units in August. This level of growth was significantly lower than the 38% growth in July and sales fell 7.9% month over month.
Detailed retail estimates show that there is pressure on domestic China sales as local competitors such as BYD, Xiaomi, and Geely, are in a race to the bottom with price, product, and technology. Tesla in this sells at a disadvantage as positive automotive sentiment contrasts with a highly competitive market.
Energy Storage Adds Useful Diversification
Tesla added 41% growth from Q2 deployments of energy storage at 13.5 GWh. This business activity is more important now as growth outside of vehicle sales is needed for the business.
With more installations needed for the expansion of AI and demand prompted by data centers and improvements to the power grid, Megapacks and utility scale storage will be a greater contributor to Tesla's revenue. For now, vehicles dominate the economics.
Tesla Technical Analysis: $368.57 Is the Breakout Trigger
Tesla (TSLA) closed on September 8th at $368.16, nearly $368.24 on the chart. The price remains within the rising channel after breaking the previous descending trend line, thus, the short-term structure stays constructive.
Tesla Price Chart - Source: Tradingview
The immediate resistance is positioned at $368.57, with a sustained hourly close above this level strengthening the breakout. This would extend the breakout above $380.16. Beyond that, $390.61 is the next level.
A bullish RSI of 57, just above its signal line of 48, means that buyers have some, but not enough, momentum, and the market is not overbought. In the event that we do break below the $355.04-$355.51 zone, which is also the key support zone and is reinforced by the rising channel and moving average, the structure would weaken and we would expose $341.51 and then $324.67.
Key Levels
Latest completed close: $368.16
Breakout resistance: $368.57
First upside target: $380.16
Higher target: $390.61
Key support zone: $355.04-$355.51
Secondary support: $341.51
Major support: $324.67
RSI: Around 57, constructive and not overbought
Why is Tesla stock in focus now?
There is a move from Tesla being an automotive recovery story to Tesla being an execution of autonomy story. There has been the start of operation of Cybercab and there has been the news of expanding approvals of FSD in Europe. Having said that, there are still many weak margins, China demand concerns and regulatory scrutiny.
What level confirms further TSLA upside?
A move above $368.57 with an hourly close would confirm the breakout to the next target at $380.16 and potentially beyond to $390.61.
Bottom Line
Tesla's September 9 setup is more neutral than what headlines would lead you to believe. Moves toward European FSD and Cybercab development are positives, but the company continues to have thin margins in automotive, negative free cash flow, and a slowdown in China. While I remain technically bullish as long as $355.04 holds, I believe a break of $368.57 confirms the next leg toward $380-$391.
Find out more
Comments