Congratulations Tesla Bears: You Win Again
Another Tesla (NASDAQ: TSLA) earnings call has come and gone. The only thing falling harder than the price of the stock is the company's operating margins. That was a bad joke, but Tesla shareholders need something to smile about these days. The stock fell by nearly 14.0% this week and is at its second-most oversold reading in history. The bleeding has to end at some point right?
On Friday, Tesla closed out its sixth-consecutive red weekly candle, even though the stock posted a modest rebound of 0.34%. Hardly a rallying cry from the bulls but Tesla has held support around this $180 level for the past couple of days.
In the past, I’ve been a noted Tesla bull. Actually, I’ve been an EV bull and not just for Tesla. But things have changed. It’s not just a distracted Musk or a slowing demand for EVs, the company just does not have the same aura it used to have. Even with the recent launch of the Cybertruck, the stock barely moved and even the Tesla community hasn’t been as vocal or excited. It could be an example of the fatigue investors feel with Tesla. What was once the most popular stock on the market is now being revealed as a company that is showing declining growth and increased competition.
Tesla Stock Outlook
So am I a Tesla bull turned bear? Not exactly. But I will make one thing clear: I think the next year or two is going to be tough for the company and the stock. Tesla itself said that it finds itself between two mega stages of growth. The valley between two peaks. If that isn’t an indication that the stock could suffer, I don’t know what is.
On the call, Musk said that the new DOJO AI supercomputer has a good chance of not succeeding which shocked a lot of Tesla supporters. This was the first time Musk had stated anything negative about the DOJO computer. Some believe that it was a way for Musk to stay in the good books with AI companies like NVIDIA ($822.79|4.00%) and AMD ($202.64|5.25%) so that Tesla remains at the front of the line for their high-powered chips. Whatever the reason is, it was a shocking moment for many of us.
Finally, you just can’t ignore a global decline in demand for EVs and a continued decline in margins due to lower prices. High-interest rate environments were never going to be friendly for Tesla, but earnings per share have plummeted over the past few years. Musk admitting that Chinese EV makers could dominate the global industry was the nail in the coffin.
What am I going to do with my Tesla shares? Hold them. I don’t know if Tesla will ever return to that pace of high growth we once saw. The next major catalyst may not come until 2025 when the mass-market EV is supposed to begin production. Until then, it might be time to accumulate cheap shares and hope for a rebound in a few years.