A big day for Tesla and Elon Musk today. Tesla’s Q1 earnings are due post market close today on April 23rd 2024. From a technical analysis perspective, things do not look great for Tesla shares. From a fundamental perspective, there has been a string of bad news for the automaker.
Before we jump into the fundamental news headlines, I want to mention that commodities are on fire. Many metals are beginning to rise in a big way joining some of the soft commodities. From an EV perspective, lithium and cobalt have not joined in on the party. Nickel is beginning to creep up. Just something longer term investors should bear in mind given the current market narrative of interest rates and inflation. Of course if prices of commodities used to build EVs rise, it would impact the business of Tesla.
Now to some of the fundamental headlines which have hit Tesla.
Let’s start with the big one. Layoffs.
That headline says it all. On April 15th 2024, Tesla announced it would be laying off more than 10% of staff globally. The Company is grappling with declining sales amidst increased competition and a price war in the EV space.
“About every five years, we need to reorganize and streamline the company for the next phase of growth,” CEO Elon Musk commented in a post on X.
“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Musk said in the memo sent to all staff.
“As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” it said.
Earlier this month, Tesla said it delivered 386,810 cars in the first quarter of 2024, a 20.1% drop from the previous quarter. The delivery drop was the company’s lowest quarterly performance since 2022.
To add to further bad news, there has been a massive cybertruck recall. Massive, meaning a recall of ALL 3,878 cybertrucks delivered so far due to a faulty accelerator pedal that could become lodged in place.
Tesla is also announcing significant price reductions across several of its models including the Model Y, Model S and Model X. Each reduced by $2000 in the US. With so many options for EVs now, Tesla will be involved in a price war. It seems just the brand name “Tesla” doesn’t do it. Or it could be just an overall slowing economy.
This sets up for an interesting reaction to Q1 Earnings out today post market.
The charts are looking bad, but investors must keep in mind that perhaps all the bad news has already been priced in. If earnings come out much lower than expectations, you would see a volatile move lower.
From a technical perspective, there are a lot of bearish confluences.
First off, Tesla failed to bounce in a triangle/wedge pattern. We broke below which is bearish.
Secondly, Tesla closed below the major support zone of $160, leading to a 15 month low for the stock ahead of earnings.
Thirdly, some would say Tesla closed below the psychological zone of $150. This now becomes near term resistance for the stock on earnings.
And fourthly:
Tesla stock has filled in the gap which I have highlighted with a red circle.
Yikes.
A lot of bearishness.
If I were to choose one price level it would be what was once support at $160. Tesla stock could pullback after earnings to retest this zone. Breakdowns tend to see price return to retest the breakdown zone providing sellers who missed the initial break with a chance to re-enter.
If Tesla can close back above $160 and confirm this close with a nice green bodied candle on the daily chart, then I would say the bulls are beginning to beat the bears and can drive the price higher. Potentially even confirming a reversal and starting a new uptrend.
But if the downtrend continues with more lower highs and lower lows, the next major support comes in around the $100 level.
