TSLA stock recovers in line with market rally

  • Tesla stock continues to recover ground as it closes at $758.26 on Tuesday, more or less flat.
  • TSLA had bottomed out at $620, which is a key support level.
  • Elon Musk and the Twitter saga drag on.

Tesla (TSLA) stock stabilized further on Tuesday after closing Friday significantly higher. The stock has been recovering ground from some heavy losses taken in the face of multiple headwinds. Tesla held the key $620 support, and this coupled with a strong recovery from the broader market enabled a move above $700. Is it sustainable though?

Tesla stock news

The Twitter saga drags on, and this has been a key component of the lag in Tesla’s stock price. Elon Musk has pledged quite a bit of Tesla stock as collateral for various over the years, and investors grew a nervous that yet more may be pledged as collateral to get the Twitter deal over the line. This was headwind number one.

Second, the situation in Shanghai with covid associated lockdowns has spooked Tesla investors. Production was halted at Giga Shanghai, which is the highest margin manufacturing site for Tesla. Data from China showed a massive 98% drop in output for the last month. Tesla failed to export any vehicles from China in April. In order to maintain and justify its extremely high share price valuations, Tesla needs to continue with its impressive growth. This will hinder that.

We recently did a deep dive into Tesla using a discounted cash flow (DCF) analysis as well as a comparative EV/EBITDA valuation and P/E valuation. We started Tesla with a $400 price target. This was using tech-sector based multiples using the Nasdaq average P/E and Apple for comparison. See the full article here, and let us know what you think. We also published a deep dive on Apple with a $100 price target. Again we used DCF and P/E valuations but modeled for a 10% reduction in 2023 revenues. See the full article here.

Tesla stock forecast

A textbook bounce from our $620 support. Shares were not only flagged by support but by oversold conditions in both the Money Flow Index (MFI) and the Relative Strength Index (RSI). This rally could extend up to and above $800. We still feel this is a bear market rally, both in terms of Tesla and the broader market. Bear market rallies can be powerful though. Tesla remains in a downtrend with lower highs and lows. Note that we also just got the dreaded death cross signal. The 50-day moving average breaking below the 200-day. Never a good look for a stock.

Tesla (TSLA) chart, daily

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The author is short Tesla and Twitter.


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