TSLA has been the darling child of retail for the past few years; the buy-and-hold-no-matter-what-because-papa-elon-will-save-us mantra has proven effective by reducing liquidity which has squeezed shorts and allowed the big boys to pump and dump to their hearts delight at these lofty valuations.
The thing is, TSLA is overvalued. This isn't really up for debate. No sane person can tell you that TSLA is worth $800/share without complaining about the voices in their head that resonate from their own echo chamber. Maybe they will be worth 800B in 2030, but capital can be more effectively deployed in the next 7 & 1/2 years that it will take TSLA to achieve this. The question is not if TSLA will fall back to reality, but when.
Take a look at this chart, TSLA is coming up on what has been an extremely important supply and demand zone: ~$760
In the past, TSLA has always had a visceral response to this level. In fact, TSLA has found support here in February and March as the lows for those months (excluding the day Putin invaded Ukraine) just wicked into range. Going back even further, TSLA built up for 3 weeks in September 2021 before going supersonic. And before that, this level represents gap up and gap down levels during the first run up to $900. To put it simply, this is an important level.
I don't think that technicals alone are enough to get TSLA under this critical level so let's take a look at a few fundamental pros and cons of TSLA (note - not comprehensive):
Pros:
Cons:
TSLA is going to return to earth faster than the first Starship SN1. I actually think that tomorrow's CPI report will be a catalyst and will offer an opportunity to either get in with confirmation or to wait for bounce up to the range, here are the three scenarios I see playing out:
1. Major CPI increase (way more inflation than expected): TSLA gaps lower, below or around $760. For me, confirmation will be once it has cleared the ~755-750 range with momentum.
2. CPI falls in line with expectations: TSLA likely opens higher, as does the whole market and drifts higher for a day or two. IMHO investors are pricing in slightly higher than expected inflation so inline will be somewhat good, but not enough for a multi-day move. This is the danger zone where TSLA could go either way and quickly.
3. Major CPI decrease (way less inflation than expected): A dozen eggs at the farmers market is now $9. The anti-inflation measures put in by the fed are laggards and if I were a betting man I'd think we see at least 1-2 more months of increasing prices. That being said, if CPI comes in way lower, look for TSLA to rebound, at least to $865-885 if not to $920 before the market looks for the next round of uncertainty and TSLA resumes its epic decay.
The thing is, TSLA is overvalued. This isn't really up for debate. No sane person can tell you that TSLA is worth $800/share without complaining about the voices in their head that resonate from their own echo chamber. Maybe they will be worth 800B in 2030, but capital can be more effectively deployed in the next 7 & 1/2 years that it will take TSLA to achieve this. The question is not if TSLA will fall back to reality, but when.
Take a look at this chart, TSLA is coming up on what has been an extremely important supply and demand zone: ~$760
In the past, TSLA has always had a visceral response to this level. In fact, TSLA has found support here in February and March as the lows for those months (excluding the day Putin invaded Ukraine) just wicked into range. Going back even further, TSLA built up for 3 weeks in September 2021 before going supersonic. And before that, this level represents gap up and gap down levels during the first run up to $900. To put it simply, this is an important level.
I don't think that technicals alone are enough to get TSLA under this critical level so let's take a look at a few fundamental pros and cons of TSLA (note - not comprehensive):
Pros:
- TSLA has an exceptional track record of beating earnings by a decent amount
- TSLA appears to gave a solid supply chain when compared to it's competitors which, at least thus far, means that chip shortages and other backlog issues haven't weighed on TSLA the same as their competitors
- The cars look cool
Cons:
- Elon is getting into TWTR (maybe he'll get TradingView next?) which means selling / sold TSLA shares to buy and less focus on TSLA. Shoot, if headlines are to be believed Elon could update his TWTR bid to be 44.20 and decide to fund the whole thing himself without external debt. Maybe he'd even sell more TSLA to make it happen.
- QE is now being reduced, the massive inflow of easy money that has led to excessively low bonds and higher stocks no longer supports the market. This cannot be understated.
- Inflation / the Fed / interest rates: the market is hyper sensitive to this right now. While, in my opinion, the target TSLA consumer is not going to change their decision based on inflation alone, the downside here is that the Fed has consistently been behind the 8ball to act on inflation and until the Fed is explicit about when interest rates increase will end (yes, I'm talking about when they'll end, not how much they will go up) there will continue to be volatility. How much will interest rates rise? Who knows, and frankly right now it doesn't matter. The thing that does matter is that no one knows, which means uncertainty which means the whales aren't going balls to the wall to leverage up again until they are confident the future is on solid ground.
- TSLAs P/E is ~110. Historically, the average is ~13-15. Don't come at me with this "TSLA is a growth story blah blah blah" that you got straight from Cathy W's teet. Yes, TSLA will grow, sure I agree with that. But look in the mirror, NQ is in bear territory, there are effectively no institutional buyers saying "this looks great right now". As said above, capital can be better deployed over the next few years until TSLA's P/E becomes reasonable (whatever that may be).
- Other car manufacturers are making major inroads in the EV space. TSLA is the king right now but Chevy, Toyota and Honda each only have <2% of their total sales as electric. I think there are bunch of good-ol fanboys of TSLA that would jump ship at the opportunity to get a low-end EV at half the cost of a TSLA. Regulations (e.g. Washington state to not allow sales of gas vehicles after 2030) and infrastructure investment (e.g. Biden's infrastructure bull) favor other players who won't need to spend nearly as much time or energy to figure out and scale their charging networks.
TSLA is going to return to earth faster than the first Starship SN1. I actually think that tomorrow's CPI report will be a catalyst and will offer an opportunity to either get in with confirmation or to wait for bounce up to the range, here are the three scenarios I see playing out:
1. Major CPI increase (way more inflation than expected): TSLA gaps lower, below or around $760. For me, confirmation will be once it has cleared the ~755-750 range with momentum.
2. CPI falls in line with expectations: TSLA likely opens higher, as does the whole market and drifts higher for a day or two. IMHO investors are pricing in slightly higher than expected inflation so inline will be somewhat good, but not enough for a multi-day move. This is the danger zone where TSLA could go either way and quickly.
3. Major CPI decrease (way less inflation than expected): A dozen eggs at the farmers market is now $9. The anti-inflation measures put in by the fed are laggards and if I were a betting man I'd think we see at least 1-2 more months of increasing prices. That being said, if CPI comes in way lower, look for TSLA to rebound, at least to $865-885 if not to $920 before the market looks for the next round of uncertainty and TSLA resumes its epic decay.