The Tesla share price bounced back in the past few days even as concerns about the economy remains. The TSLA stock price is trading at $711, which is about 14% above the lowest level this year, bringing its total market cap to about $735 billion, while Elon Musk’s net worth has risen to over $220 billion. Other EV stocks like Rivian, Canoo, and Nio also bounced back.
Tesla and other electric vehicle stocks have been in a strong bearish trend in the past few months as concerns about demand rises. As a result, the closely watched iShares Self-Driving EV and Tech ETF has crashed by more than 30% from its all-time high.
These companies are facing numerous challenges. First, competition is soaring in the EV industry. For example, Ford has become the first mainstream company to start selling EV pickup trucks. The F-150 lightning has over 200k reservations, and there is a likelihood that more orders will come through in the near term. In addition, other companies like General Motors, Volkswagen, and Rivian are ramping up their production.
At the same time, the cost of doing business has jumped rapidly in the past few months. This, in turn, has pushed Tesla to boost prices by as much as $6,000. Moreover, with interest rates rising, there is a likelihood that demand for autos will start leveling down.
The biggest concern for Tesla is that its stock is still overvalued despite the recent sell-off. At $735 billion, Tesla is more valuable than most auto companies combined. The challenge is that the company’s growth is expected to slow, making this valuation a bit stretched. This explains why Elon Musk has announced a series of job cuts.
In my last Tesla stock price forecast, I compared the company to Netflix, a company that has fallen from grace recently. I predicted that TSLA would continue falling since it formed a triple-top pattern, which is usually a bearish sign. The stock has also formed a break and retest pattern by retouching the resistance level at $700. It has also moved below the 25-day and 50-day moving averages.
Therefore, I suspect that the Tesla share price will continue the downward trend as bears target the key support at $500. However, a move above the key resistance at $850 will invalidate the bearish view.
This post was last modified on Jun 22, 2022, 09:09 BST 09:09