How Hype Fade Might Send Tesla To $40
Do-it-yourself investors thrive through independent thinking. The downside of avoiding the mob mentality is missing out on momentum. Momentum is a meaningful grade on the Quant System. While DIY considers the quality, value, and growth grades, we use them strictly as a guide.
Tomorrow, on Tuesday, Tesla will post quarterly results. It already sent many pre-earnings red flags that the stock has no choice but to relief rally on poor results. This is opposite to AI firms ASML (ASML) and Taiwan Semiconductor (TSM), which both rallied ahead of results. They fell after issuing a tepid outlook. Below: 1-month chart (ycharts).
Tesla's Fade
Tesla
cut prices of all models except the Cybertruck and Model 3
Announced Robo Taxi
Cancelled Tesla 2 mainstream model (while denying the rumors)
Sent Li Auto (LI) tumbling after cutting prices.*
* DIY rates Chinese EV firms a STRONG SELL since 2021.
In 2022/23, the firm could slash prices to hurt competitors. This time, its competitors are near bankruptcy.
AI Hype Cycle, 2023:
2016: VR
Tesla Fair Value
Tesla trades at 5% above its fair value. The downside risk is to $139.72.
Get Six Warnings from Stock Rover
To fall to $40 would require an immediate acceleration in negative market momentum. No one except insiders know what Tesla will report tomorrow or how markets would react.
Get Ford's Fair Value from Stock Rover
Tesla missed expectations twice in a row.
Source: Stock Rover Research, Page 4
The stock enjoyed seasonal strength. The chart below suggests a RALLY through at least August.
Your Takeaway
Be wary of pump and dump schemes, the biggest of which is the Fed's Pivot Fade Fantasy.