Source: PaxForex Premium Analytics Portal, Fundamental Insight
Tesla's recent performance hasn't been favorable for shareholders, with the stock experiencing a 31% decline in 2024 compared to the Nasdaq Composite Index's 7% gain.
The negative sentiment surrounding Tesla stems from disappointing production figures. In the first quarter of this year, Tesla's unit deliveries dropped by 8.5% year over year to 387,000 units, falling short of analysts' expectations for the leading electric vehicle (EV) producer.
Despite the downward trend, some investors may see an opportunity to buy Tesla shares at a significant discount, considering the stock is currently 58% below its all-time high. Proponents of Tesla point to several factors supporting their bullish stance.
One argument in favor of Tesla is its comparatively lower price-to-earnings (P/E) ratio of 39.8, which is notably lower than earlier in the year. This may attract investors who perceive the current valuation as an attractive entry point.
While Tesla has encountered challenges, such as modest sales growth of 3.5% in the fourth quarter and declining margins, bulls view these setbacks as temporary hurdles. As a prominent player in the EV industry, Tesla is poised to benefit from increasing momentum toward sustainability in the long run. Additionally, proponents anticipate a resurgence in demand for EVs once interest rates decline.
Furthermore, supporters of Tesla are optimistic about the company's ambitious goals. CEO Elon Musk aims to achieve full self-driving capabilities and plans to deploy a fleet of robotaxis, which could generate lucrative revenue streams for Tesla. Moreover, Tesla's potential expansion into the robotics and energy sectors could serve as significant revenue drivers in the future.
Tesla's current challenges are fueling the bearish sentiment surrounding the company, suggesting that these difficulties may persist.
In contrast to its position five years ago, Tesla now faces formidable competition from traditional automakers aggressively expanding their EV divisions. Additionally, there is a growing number of domestic and international rivals solely focused on EVs, implying that Tesla's growth prospects may be considerably subdued as the industry becomes increasingly crowded.
Furthermore, intensified competition is exerting ongoing pressure on pricing. Tesla's unique positioning as a provider of superior EVs may be diminishing, thereby limiting its capacity to command premium prices. This is evidenced by the company's implementation of multiple price cuts to remain competitive, potentially leading to margin compression.
While early investors were drawn to Tesla's remarkable growth trajectory, recent years have underscored the company's susceptibility to the realities of the automotive manufacturing sector. Consequently, Tesla is susceptible to macroeconomic influences, particularly fluctuations in interest rates, making its financial performance cyclical.
Although some investors may perceive Tesla's discounted valuation as an opportunity to acquire the stock, others argue that it may still be overvalued. The market's premium valuation of a car manufacturer hinges on the assumption that Tesla's ambitious long-term initiatives, such as robotaxis, energy ventures, and robotics, will undoubtedly materialize. However, this assumption remains uncertain.
Considering these factors, the negative aspects outweigh the positive attributes. Therefore, there is hesitancy to invest in Tesla at this time.
As long as the price is below 195.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 172.05
- Take Profit 1: 160.00
- Take Profit 2: 140.00
Alternative scenario:
If the level of 195.00 is broken-out , follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 195.00
- Take Profit 1: 210.00
- Take Profit 2: 225.00
