Tesla disappoints, should we sell the number one electric car? : the stock market advice

Tesla is struggling in the stock market. The automaker founded by Elon Musk has just released contrasting quarterly earnings, marked by slightly higher-than-expected earnings but below-expectations sales and a disappointing gross margin. UBS says it is disappointed with the gross margin ratio, even though the cash flow (free cash flow or operating cash flow after investments) is considered “solid”. In addition, the American electric car giant had recently disappointed in deliveries, which also fell short of expectations.

2022 has been “difficult for Tesla, between logistical problems in China, the possibility of a takeover of Twitter by Elon Musk and problems in the supply chain,” notes Josh Gilbert, market analyst at eToro. Incriminating the logistical problems, the direction tried to reassure the request, considered vigorous in spite of everything. But Tesla will be expected at the turn of the fourth quarter accounts. “As competition intensifies, it will be a difficult quarter for Tesla, not least because its shareholders are not used to disappointment”, warns the expert.

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Tesla has been hampered by the strength of the dollar against other major currencies, rising raw material costs and administrative delays for opening its new production sites in Germany and Texas. If the additional costs were partially passed on in sales prices, some analysts are concerned about a future slowdown in demand, given the high cost of the group’s models and rising tariffs, which depress consumption. And Elon Musk fears an impending recession in China and Europe, while in the United States he fears the Fed will raise its base rate too sharply.

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Wolfe Research stays in action for a long time, but lowers its price target from $360 to $288, just from a fundamental point of view. For 2023, Deutsche Bank judges that Tesla could increase its gross margin by 3 percentage points, due to increased production units benefiting from lower cost of goods sold. Between the launch of the Cybertruck and Semi and the expected increase in production volumes, the upcoming exercise promises to be “crucial” for Tesla, according to the German bank.

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Beware, Elon Musk’s continued takeover of Twitter could encourage the billionaire to sell more Tesla shares, which would put mechanical pressure on the stock market.

Momentum, a premium investment letter and newsletter from Capital Exchange, had recently (see our bullish anticipation Oct 14) anticipated a technical rally in Tesla stock from its main support at $206.86-209.40. And our target (the 13-day exponential moving average) of $331 was almost reached. Let’s now look at a possible retest of the main support which is currently at $204.16-209.40. Check out our full Tesla in Momentum review.

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Author’s declaration of interest

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