TESLA TLSA IS MEETING RESISTANCE - RIPE FOR SHORTING
Tesla has rebounded off its lows and is now coming up to major resistance as shown. Some investors believe the small increase in car production last quarter is something to be bullish about. However consider this:
market cap/cars sold TSLA 121416, General Motors 6475, Ford 6887
Using the measure market cap/cars sold, TSLA is clearly way, way overvalued. Even if TSLA grows at 35% per year, it will take many years before this ratio comes in line with GM and F. Making an electric car compared to an internal combustion engine (ICE) should be simpler, less moving parts. TSLA will have a lot of competition also from GM, F, Mercedes, BMW, Toyota and so on. Price margins will remain under pressure and sales may not be as robust as you think as ICE are gradually phased out as EVs come in. This will be a gradual process, not a massive ramp up. Sales growth may not meet the 35% pa as expected. Subsides for EVs are being reduced also in the US and China so margin pressure will be there. TSLA also has a huge debt on its balance sheet, this is a drag on its valuation. I expect TSLA to fall below $150. If it gets to $100, consider it then a buy.
Technicals - The RSI and ROC oscillators are topping out now, this is a sign of impending downward pressure on TSLA.
market cap/cars sold TSLA 121416, General Motors 6475, Ford 6887
Using the measure market cap/cars sold, TSLA is clearly way, way overvalued. Even if TSLA grows at 35% per year, it will take many years before this ratio comes in line with GM and F. Making an electric car compared to an internal combustion engine (ICE) should be simpler, less moving parts. TSLA will have a lot of competition also from GM, F, Mercedes, BMW, Toyota and so on. Price margins will remain under pressure and sales may not be as robust as you think as ICE are gradually phased out as EVs come in. This will be a gradual process, not a massive ramp up. Sales growth may not meet the 35% pa as expected. Subsides for EVs are being reduced also in the US and China so margin pressure will be there. TSLA also has a huge debt on its balance sheet, this is a drag on its valuation. I expect TSLA to fall below $150. If it gets to $100, consider it then a buy.
Technicals - The RSI and ROC oscillators are topping out now, this is a sign of impending downward pressure on TSLA.
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TSLA just announced its second qtr earnings. Loss of $408 million, eps -2.31 per share. Although TSLA is slowly ramping up production, it is not converting it to profit. Its gross margins declined latest quarter. I suspect the cost pressures of lowering prices to compete against the many other car manufacturers and the burden of high debt and cost of sales is causing the losses. TSLA will be a buy when it gets undervalued at around $100 per share. Until then, short sell or stay on the sidelines. Latest price action downwards confirms this idea.