Tesla shares continue to fall in the markets and many followers of the company are beginning to worry. Most investors find a culprit in this sharply downward trend: Twitter. However, fixing the situation of the social network that Elon Musk owns might not be to solve the situation of enough titles from the electric vehicle giant, according to some experts who believe that there are other factors that come into play. .
The stock has been on a downward trend since September when its CEO took over Twitter. That added the sale of its own shares with the added concern of the investors of the automotive company, due to Musk’s concern in managing his new company. “Investors are also concerned by reports that Tesla may be experiencing a drop in demand for its electric cars produced at its Shanghai, China plant,” Jefferies says in a report.
Tesla shares are now down about 11% for the week, and nearly 30% since the South African businessman’s acquisition of Twitter, underperforming the Nasdaq Composite by about 33% over that time span. . “Now, investors are hoping that Musk will stop tweeting so much and that things will calm down on his social media platform… That is the catalyst Tesla bulls want,” say Atlantic Capital experts.
I have the highest respect for @elonmusk as a manager, leader and visionary. I only wish he would hire someone to fix Twitter and focus on $TSLA as CEO with all its opportunities and challenges and that it could be a $3T market cap company in 5 years.
— Gary Black (@garyblack00) December 13, 2022
“Musk will realize that attacking his left-wing customer base is hurting the Tesla brand and toning down his political views,” Future Fund Active co-founder and Tesla shareholder Gary Black wrote on Twitter Tuesday. He also hopes that Musk will soon name a new chief executive to take the reins of the social network.
China: the catalyst for and against
Fears around Chinese demand have been exacerbated by lockdowns and other measures to stop the spread of Covid. Tesla also cut prices for Chinese customers, which some experts say was done to stimulate demand. Shares continued to fall despite the report that insurance records for Tesla’s Model 3 and Model Y have been trending higher so far this month.
“Insurance records are a good indicator of demand, but there have also been conflicting reports that Tesla plans to cut production in December after record November shipments from its Shanghai facility,” JP Morgan says. Tesla’s factory in China produced more than 100,000 vehicles in November, but the company is planning to cut Model Y production by 20% this month.
However, a latest report showed that insurance registrations for the Model Y and Model 3 rose about 10% from the first to the second week of December to nearly 13,000 units. “Of course, this positive signal does not seem to satisfy investors, although long-term thinkers might be interested in having a Tesla in their portfolio,” they comment from Atlantic Capital.
With a price-earnings (PER) ratio now below 50, based on the results of the last 12 months, and plans to increase production by 50% or close to it annually, the price-earnings-growth (PEG) ratio Tesla’s is now close to 1. “That could be the level that gets buyers back into action, but it’s not seen right now,” he adds from Jefferies.
A difficult technical situation
Chances are, however, that those actions won’t give the EV giant’s stock the boost it’s hoping for. The electric car firm’s stock chart continues to look weak on Wall Street. Technical analysts look at chart patterns, moving averages, and resistance levels as a shortcut to understanding how investors feel about a stock from above and where the stock might be heading in the short term.
“Since the beginning of November, the Tesla chart seems to be ending a head and shoulder pattern which is usually a clear bearish sign,” explains Katie Stockton, an analyst at Fairlead Strategies. “Breaking $180 about a month ago was a sign to technical analysts that more pain was coming for investors in Tesla stock… The stock had some support around $166, but is now below $166. That level (…) The support zone between $120 and $155 from the end of 2020 is the next thing to watch”, adds the founder of CappThesis and technical analyst, Frank Cappelleri.