Tesla (TSLA) stock has turned down sharply over the past week and is down around -40% YTD. Sentiment has turned strongly bearish after Tesla reported dismal Q3 production and delivery numbers way below market expectations. Will TSLA continue on its downward trend or rebound higher soon?
Demand concerns
Ken aka Chicken Genius Singapore explains the bear case for Tesla nicely in his video. Basically, in a weak economic environment, Tesla might start to face weak demand. Q3 deliveries, shrinking backlog and reduced wait times in China supports this line of thought.
Tesla AI Day 2
Tesla’s second AI Day just happened on 30th September 2022, and the presentation blew my mind 🤯 again just like at the first one last year. Tesla bulls will probably gain confidence in Tesla‘s long term potential from this event.
I’m not gonna hide the fact that most of what was presented went over my head, too cheem (in-depth/technical) for my limited understanding of AI and robotics. It was still exciting to see all the cool stuff the Tesla team is working on.
Highlights from AI day 2:
- Optimus robot prototypes
- Full self driving
- Dojo supercomputer
Read also Tesla AI Day highlights: Robots and supercomputers
If you haven’t, watch Tesla Daily’s super cut video or there full event video if you wanna full-on nerd out.
Tesla appears to be flexing its tech muscles at this event by presenting in quite a bit of detail their work in AI and robotics. Most of the finance community seems to be focused on the bot hardware and were underwhelmed thus maybe selling off the stock.
I think it’s very impressive that they can transfer the know-how from FSD, battery tech, chips, and manufacturing from cars to robots. Who knows what other platforms they can transfer their knowledge over to in future.
That said, the bots will only be used at Tesla factories as a start. Until we see other companies actually buy these bots from Tesla, it’s still a risk and a product many on Wall Street will probably not even factor into their valuation models yet.
Valuation
Speaking of valuations, TSLA is now trading at 86x trailing P/E and 11x P/S, a far cry from its 1Y peak of 395x P/E and 26x P/S. That said, TSLA has not fallen to levels I’d consider bargain basement levels like other tech companies or auto makers.
TipRanks average analyst price target for TSLA is still pretty positive at $306.15 (27% upside). Long term, I think TSLA is worth much more if they continue to execute.
Position update
Currently we have a combined ~$33k ($8.2k family + $24.7k personal) with of TSLA stock making up around 18% of total invested assets. This makes it the largest individual stock holding and 2nd largest position overall behind VT ETF.
Recently I’ve been trading TSLA more actively in my personal account on moomoo (since it’s zero commission and zero platform fees), with the increased volatility. So far, I’ve not touched any in the family accounts.
In the near term, I’ll probably be layering into TSLA stock as it continues to decline. If the stock falls below $233, I think the next support level is $208. If it breaks below $200, I’ll probably hold off until the $150 range before accumulating more shares.
The next catalyst will likely be Q3 earnings on 19 October 2022. My gut feel is that unless Tesla blows it out of the water, TSLA stock will likely face more weakness post-earnings in view of the bearish sentiment and weak macro overall.
See my investment thesis for Tesla here.
Are you bullish of bearish on TSLA right now?
Disclosure: I’m long TSLA
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