How much more will TSLA$特斯拉(TSLA.US)$ drop? $150? $100?
Back in December 2022, Tesla $Tesla(TSLA.US$ dropped from 190 to 110 in a span of 4 weeks, the market panicked during that period. It did seem like all the bad news came out one after another: Elon's twitter hangover, China production halt, Board's unwillingness to do stock buyback, the so-called Tesla bulls were lashing out on Elon spending too much time with Twitter and leaving Tesla investors hanging there, and the list goes on and on. Fast forward to 3 months later, “investors”got hyped up again on Investor day, which was literally a nothing-burger. So what has changed in the last 3 months? The answer is nothing but price.
Warren Buffet has a famous quote of when everyone's fearful, I'm greedy and when everyone's greedy, I’m fearful. Tesla's sentiment was a perfect example of his quote. When the stock was dropping viciously in December, many were calling for tesla going to $80 and $60 a share and of course many were fearful to buy the dip. I recalled at one point, Tesla's 2025 EV/EBITDA traded at 10x and people still think it was expensive. To give you an example, Coca-Cola $Coca-Cola(KO.US$ , Buffet's all-time favorite, is still trading at 17x 2025 EV/EBITDA. And if you tell me Tesla's growth will lag behind Coca-Cola, think again!
Tesla is known to be a story of retail investor knows the stock better than institution does. But what I saw in last December was a capitulation among both long-term institution holders and some retails. According to 13F filed by asset managers such as Baillie Gifford, Jennison Associate and T Rowe Price Group all trimmed their tesla holdings.
Fundamentally, Tesla is still executing by expanding its existing Giga factories capacities and global footprint, the new Mexico plant. Macro played as a headwind in December and will continue to be the headwind well into 2023 and possibly extending to 2024. Tesla will face demand pressure just like other OEMs do. But tesla's industry-leading margin provides lots of room for price reduction. According to Elon at the Investor’s day, moderate price reduction was welcomed by consumers. I do however expect THERE WILL BE MORE PRICE CUTS in 2023 due to deteriorating demand from macro impact.
From a technical perspective, as shown below, Tesla may find its first support at 50% fab. retracement, $160 or the next level support at $145 which will also close the gap from January as well. RSI is around 45 so it's neither bullish or bearish.
In a long run, Tesla is no doubt the leader in the space and there will be more bumps along the way. In short to median term, tesla is facing macro headwind and it's unlikely to disappear anytime soon. Focus on the fundamentals and use short term volatility/sentiment to add and trim your exposure may work out very well on Tesla.
Disclosure: The author owns tesla stock at the time of this writing. This is not financial advice.
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104007845 : drop to 160
Silverbat 104007845 : Too much!