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Have Tesla’s shares been overbought?

Tesla

Tesla’s shares rose for 13 consecutive sessions in a row from the end of May to mid-June this year, posting the longest winning streak in its history. The EV maker’s stocks rebounded about 70% from the low in April, and more than 150% from the low in January. Now its share price has reached the highest level since September 2022. The recent AI-powered tech rally and GM’s partnership with Tesla to adapt its Supercharger all have contributed to the rally. However, at the same time, the swift rebound of Tesla’s shares may have sparked concerns about an overbought market.

Tesla’s rapid development in the Energy business

Despite a slowdown in its overall revenue growth, Tesla’s energy storage income saw a sharp increase in the first quarter. Its revenue from the battery energy storage deployments, including Powerwall storage devices for homes and businesses, Powerpack, and its utility storage unit Megapack, jumped 360% from a year ago. The recent partnership with rivals, including Ford and GM, may promote the US industry participants and the government to invest more in electric car charging stations to adopt Tesla’s Supercharger. Tesla becomes an Apple-like industrial pioneer that domains the EV industry. However, the energy storage revenue only accounts for 8% of the overall revenue, which may not have an imminent impact on the company’s near-term growth trajectory. The development in Tesla’s battery business will be more of an advantage for the company to limit its rivals’ expansion, enhancing Tesla’s dominant market share in the US. And this will be a spotlight in its second-quarter earnings report.

Source: Tesla

Tesla faces a growth hurdle due to macro headwinds

Tesla delivered a record 422,000 vehicles from a total production of 440,808 vehicles in the first quarter. The delivery number represented a 4% growth sequentially and a 36% increase from a year ago but was shy of Wall Street’s expectation for 432,000 vehicles. The increase in car deliveries slowed down from 40% annual growth in 2022, suggesting that the EV maker is losing momentum in growing sales. Despite a record car delivery number, Tesla’s profit margin has been squeezed by its price discounts, which fell to 19.3% in the first quarter from 29.1% a year ago.  And its overall revenue growth slowed to 24% during the same time frame, the lowest since the first quarter of 2021.  

Source: Tesla

According to reports from Second Measure, 23% of initial deposits have been refunded due to production delays, implying that the EV maker faces challenges to shore up its profit margin by meeting the delivery target.  

An upgrade in earnings forecast, and ARK decreases Tesla’s position

Recently, Tesla raised its higher-end EVs prices for the second time this year, including Model S, Model X, and Model Y. The cheaper car, the Model 3’s price has also been increased by US$400 in early May. The price hike may improve its profit margin for second-quarter earnings.

A few researchers, including Zacks Investment, and KGI Securities, have upgraded Tesla’s earnings forecast lately. But the consensus price target is below the current price according to a Bloomberg survey. The ARK Innovation ETF decreased its position in Tesla by 9.01% on 13 June 2023.

Technically overbought? 

Source: CMC Markets as of 16 June

RSI shows that Tesla’s shares may have been overbought, facing a potential near-term resistance of about 267, where a selloff may occur at this level, then 223 could be targeted as near-term support. And the pivotal support could be at the 200-day moving average of 196.

On the flip side, a bullish breakout of 267 may take the share price to the potential long target of 310. 


Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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