- Tesla stock closes up 1.7% on Wednesday at $711.
- TSLA stuck in a wide band of $620 to $760.
- Twitter files suit against Tesla CEO Elon Musk.
Tesla (TSLA) remains volatile and directionless, both in terms of stock performance and its autonomous driving unit. The stock has been under pressure for most of 2022 but so far has held the key $620 support. Tesla has been caught in the downdraft from Elon Musk's attempt to buy Twitter (TWTR). As things turn ugly in that sphere, investors are trying to determine how that impacts Tesla. It could be seen as a positive with Elon Musk now less stretched on the acquisition and free to focus more energy on Tesla. Another positive can be taken from the lack of any need to pledge Tesla stock as collateral for the Twitter deal, but the news on Tuesday that Twitter had filed suit sent Twitter shares higher in hopes of potentially pushing the deal through. This, in our view, is highly unlikely.
As well to the fury surrounding the Twitter lawsuit, it also came to light on Wednesday that Tesla's Head of AI has now formally left the company after a four-month break.
Tesla has recently announced a delay to its AI day until September 30, so perhaps this is to announce some development or replacement? Either way, it creates more uncertainty for the stock.
My short position in Tesla is more of a macro view rather than a negative take on Tesla itself. Tesla is one of the highest stocks out there in terms of P/E and other multiples. In a combined monetary and fiscal tightening scenario, stocks such as this tend to rerate pretty sharply. I do feel Tesla has some challenges ahead, but these are not unique to Tesla. The automaker will probably navigate them better than legacy automakers who are notoriously terrible at navigating recessions.
Tesla has had a free run at the EV sector just as Netflix had a free run at the streaming sector, and look what happened next once the legacy companies entered. Most Wall Street analysts forecast Tesla to have a market share of 15% of the EV or auto market. This is way too high in my opinion. No automaker has ever managed to have such market share to my knowledge. Toyota is currently the world's number 1 with a 10% market share.
Technically, $620 remains the key level. A break there should lead to a move to $540, but there is a volume gap until $430 and things could get really ugly if $620 breaks. This current phase looks like a consolidation phase after the move lower. Consolidation phases usually result in a breakout in the direction of the preceding trend, i.e. bearish. Breaking $760 ends this and likely ends my short!
Tesla chart, weekly