New Tesla Price Target After Earnings News Turns Heads
Elon Musk and Tesla face challenges, but the electric vehicle firm could be on the cusp of a generational buy.
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I’ve owned shares of Tesla TSLA at various times, but I’m not holding the stock into Tuesday’s earnings. Where are shares of the Austin, Texas-based EV manufacturer headed next?
It's been a tough year for Tesla. Regardless of how you feel about CEO Elon Musk’s involvement in U.S. politics, the Tesla brand has likely suffered some damage. Uncertainty surrounding the effect of tariffs on Tesla’s business is also weighing on the stock, which is down 41% year to date.
Tesla Earnings
After Tuesday’s closing bell, Tesla is expected to report earnings of .42 cents per share, and revenue of $21.4 billion.
While I’m not concerned about Tesla’s ability to meet those expectations, I wouldn’t be surprised if the stock falls after the report. Not only is the stock out of favor, but the overall market is trending lower, with the benchmark S&P 500 losing 13% so far this year.
Traders have adopted a sell-first, ask-questions-later mentality, and Tesla hasn’t been an exception. Under these circumstances, we shouldn’t be surprised if Tesla moves lower after Tuesday's close. If that happens, it just might create a buying opportunity.
Determine the Entry Point
Right now, Tesla is hovering near a support level of approximately $220 (black horizontal line below). Tesla shares have managed to stay above that line for over a month.
However, there is an indication that Tesla could soon break below support, in the form of a bearish trend line (black diagonal line below).
The combination of those two lines creates a descending triangle pattern (black lines below). This bearish pattern suggests the path of least resistance for Tesla leads lower, at least for now.
The highest close within that pattern is $288, on March 25. The lowest close is $221 on April 8. The distance between those two points is $67. Subtract $67 from the lowest close, and the result is a price target of $154.
The End of the Tesla Run Could Lead to Generational Buy
If that target price seems harsh, consider that Tesla traded at that price as recently as April 23, 2024 - almost exactly one year ago. Tesla is coming off of an incredible run, gaining 62% last year, and 101% in 2023.
If you’re long Tesla, I’m sure you don’t want to see the stock drop to the $150 to $160 area. But if it does, the stock could be a generational buy at that price.
Tesla's long-term potential is undeniable. There is no reason not to own it — unless you believe you'll be able to buy it for less in the future. If the stock falls, this could be an opportunity to own the company for just one-third of the price Tesla traded at just four months ago.
At the time of publication, Ponsi had no positions in any securities mentioned.
