Tesla, one bad news after another. Sell now? Buy later?
There’s an English idiom that says, “Misfortunes never come singly”.
I think it best describe what $Tesla Motors(TSLA)$ is going through right now.
No sooner had it reported a disappointing Q3 2023 results, it is slapped with another long-standing brewing trouble (caused by the man, himself). (see below).
After reporting earnings that landed below Wall Street's expectations, Tesla also disclosed that its automated driving systems are under deepening federal scrutiny.
In a Mon, 23 Oct 2023 filing with Securities and Exchange Commission (SEC), Tesla said it had received requests from the Justice Department that included subpoenas asking it to turn over documents relating to its autopilot and full self-driving features.
In addition, Tesla also received requests for information, "including subpoenas," on a wide range of other issues "regarding certain matters associated with personal benefits, related parties, vehicle range, and personnel decisions."
Although the Justice Department had already requested for information concerning Tesla’s autopilot and self-driving features in January 2023, the latest Monday incident suggested DOJ has launched a more serious inquiries.
The new probes deepen legal entanglements for the EV maker amidst poor earnings’ showing.
Looking at its fateful Q2 2019 earnings:
Loss per share on an adjusted basis: -$1.12 versus. -$0.40 cents expected.
Revenue: $6.35 Billion versus $6.41 Billion expected.
Latest Q3 2023 earnings:
Earnings per share on adjusted basis; $0.66 cents versus $0.73 cents expected.
Revenue: $23.35 Billion versus $24.1 Billion expected.
Everyone knows the drill, when Wall Street is dissatisfied with earnings’ results, it will react, causing a company’s stock price to plunge.
Looking at Tesla’s stock price for [a] past year, [b] past month and [c] past 5 days — see below.
Tesla fell by -5.44% for the past year duration
Tesla fell by -12.99% for the past month duration
Tesla fell by -5.80% for the past 5 days duration
Is there a need to elaborate about Tesla’s falling stock price based on different sampled durations?
The writing is on the wall, no?
Still unconvinced, let’s look at Tesla via technical analysis (TA) approach. (see below)
My observations about Tesla’s [a] Moving averages (ma) of 20-day, 50-day & 200-day and [b] Relative strength index.
On 20 Jul 2023, it fell below its 20-day ma.
On 04 Aug 2023, it fell below its 50-day ma but recovered.
On 21 Sep 2023, it fell below its 50-day ma “permanently”.
On 20 Oct 2023, it fell below its 200-day ma.
With an RSI of 30, it is oversold at the moment. Do you think Wall Street cares?
Another nail to Tesla’s coffin must have been latest news from $Hertz Global Holdings, Inc.(HTZ)$ . (see above).
Thanks to Tesla’s incessant price cutting etc.. the repercussions are hitting the customer (Hertz) hard and they are reacting.
Hertz is jamming their brakes on plans to electrify more of its rental car fleet after:
EV repair costs are higher than Hertz has anticipated.
After Tesla (one too many) price cuts have reduced the resale value of the majority of electric cars in its fleet by easily -30%.
Hertz has 80% of the battery electric cars in its fleet are Teslas; this comes up to about 35,000 Tesla EVs.
Based on Hertz’s original 2022 plan, it was supposed to have an estimated of 100,000 Tesla EVs by end 2022.
Looks like the balance 75,000 Tesla EVs will have to wait until after 2024 for a possible appearance.
Who knows, by then something exciting might just come along and distract Hertz altogether? Right!
Business wise, it means less sales for Tesla. That can’t be a good thing - right?
My Viewpoints:
Tesla’s RSI reading of 30, is derived based on its prices averaged-out overtime, based on stock price determined by market forces.
It does not reflect the “real” value of a company.
Looking at the above, it is “safe to assume” that Tesla is in a downwards trending momentum.
That has gathered pace since Q3 2023 results were released.
With 10 years Treasury yields still hovering around 5.0%, US market remains sensitive & volatile.
Suffice to say if Tesla does not come out to defend itself with regards to its long overdue full self driving (FSD), negative sentiments might just linger a wee longer.
Despite the recent market turbulence, if a comparison of Tesla’s and $S&P 500(.SPX)$ is carried out, it could be seen that Tesla’s performance fared worse than the S&P 500 composite index.
This happened from 17 Oct 2023 onwards, the day Tesla released its Q3 2023 earnings report.
Do you think Tesla will fall to its 03 Jan 2023 lowest of $108 per share again?
Do you think it is more prudent to sell Tesla now and buy it later at a lower price?
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