I'd Keep Tesla in Neutral for a Bit

First, there was some moderately good news from an unlikely source. Truist Financial, led by five-star analyst William Stein, kept a "hold" rating and a $360 target price on Tesla TSLA, while making what read like positive comments. Truist noted that after three driving reviews of Tesla's FSD (full self-driving) technology had shown "material weakness," the most recent test of FSD was appeared more successful. Version 13 of FSD show results that were "more impressive" and required no human interventions. Truist, however, still not being positive on the stock, added that it would not recommend use of the FSD technology as imperfections "remain obvious."

Then came the press release that we all had been waiting on. Tesla produced 459,445 vehicles during the fourth quarter, delivering 495,570. This number for vehicles delivered was up 2.3% from the year-ago comparison of 484,507, but still well below Wall Street's consensus, which had been for close to 507,000 deliveries. For the full year, Tesla delivered 1,789,226 vehicles, up from 1,773,443 in 2023. The company also deployed 11.0 GWh of energy storage during Q4, which itself was a new quarterly record and 31.4 GWh for the full year.

Earnings

Tesla also announced this morning that it will release its fourth-quarter financial results after the closing bell on Wednesday, Jan. 29. A call including a live Q&A session will take place at 5:30 p.m. ET that evening to discuss those results and any outlook provided. Coming into this morning, 24 of 26 sell-side analysts covering Tesla had increased their estimates for the quarter since it started, with Wall Street looking for an adjusted earnings per share of $0.76 on revenue of $27.4 billion. That would compare to the year-ago adjusted EPS of $0.71, while reflecting year-over-year sales growth of almost 9%.

Growth of 9% would equal the firm's best pace of year-over-year growth for any quarter since Q2 2023. The question now becomes: Do some analysts now pare back their expectations as they were probably made with a higher number for deliveries in mind? Secondly, can a company that hasn't grown sales by even 10% in six consecutive quarters be considered a "growth" stock -- and, if it's not a growth stock, does it deserve to be priced at 117-times forward looking earnings and 18-times book? I understand the strong balance sheet, but that does not get any stock a triple-digit multiple. In case you're wondering, short interest is not very high, only about 2.9% of the entire float. I think most traders, by now, have learned not to short this name the hard way, your author included.

The Charts

I'm not really sure what I am looking at. I do know that what I am looking at is not especially bullish.

Are we looking at a double-top reversal pattern with a $415 pivot? That would put my target price to the downside close to $352. Relative strength is falling and the daily Moving Average Convergence Divergence indicator is clearly bearish.

Or am I looking at a yet to be completed head-and-shoulders pattern with a potential $330 neckline? That would be much, much worse for the stock. 

That would put my target down in the $280 area. I think this possible outcome is a bit much, so I'm just going to keep this one in my back pocket, unless a second shoulder really does develop.

My Take

I am flat the name right now, so I can just look the other way, but I know many of you are in this stock. I do not think this morning's dip is deep enough to add if one is long the stock, nor do I think this is a good place to initiate. If my first chart is the pattern to follow, then the stock's 50-day simple moving average, currently $349 and maybe $352 in a few days, might be the spot to either add or initiate. For that opportunity I now wait. Of course, with earnings four weeks away, the longer this takes, the better the reason to sit on one's hands.

At the time of publication, Guilfoyle had no position in any security mentioned.