As anticipated in the previous forecast, Tesla shares showed strong growth after breaking through the 290 resistance level. Over the past week and a half, the stock price rose more than 20%, but buying momentum has noticeably weakened in recent days. Yesterday, the US stock market weathered the blow from Moody’s downgrade of the national credit rating, yet Tesla’s stock fell by 2.3%. Likely, traders were looking for any excuse to lock in profits, and now the shares are beginning a corrective pullback.
Yesterday, Xiaomi announced it will unveil its YU7 electric SUV this Thursday. Analysts view this vehicle as the main competitor to Tesla's Model Y in China - which happens to be Tesla's best-selling model in the world's largest auto market. Xiaomi's first EV, the SU7, has already been consistently outselling the Tesla Model 3 in China, and now the American automaker may face even greater challenges.
Morgan Stanley analysts see significant downside risks for Tesla's stock. They estimate Elon Musk's core automotive business alone justifies a share price of just 50–100. The remainder of Tesla's valuation reflects investor faith in future segments like autonomous driving, energy storage, and robotics. However, these divisions are either partially or fully non-public, making their current economic viability virtually impossible to assess.
Morgan Stanley analysts maintain a long-term bullish outlook on Tesla shares with an $800 price target. However, they note this valuation would require the company to achieve $20 in net earnings per share versus just $2 currently. With Tesla no longer dominating the EV market, the company needs dramatic financial improvement; otherwise, investors are unlikely to drive its market cap higher.
The technical indicators RSI and Stochastic on Tesla's daily chart are turning downward from the overbought zone, signaling a sell. The bears' target could be the previously broken resistance level at 290.
Consider the following trading strategy:
Sell TSLA at the current price. Take profit – 290. Stop loss – 360.
This content is for informational purposes only and is not intended to be investing advice.
