- HSBC hands TSLA stock a Reduce rating and price target of $146.
- Tesla stock is consolidating right on top of $210 support level.
- HSBC analyst says too much of Tesla growth story comes at end of decade.
- President Joe Biden supports UAW attempt to unionize Tesla factories.
Tesla (TSLA) stock moved up 2.2% on Friday afternoon, ahead of the NASDAQ Composite, which rose 1.8%. TSLA stock is hovering just above an important support zone at $210. Should it give way, shareholders could experience a 24% drop to long-term support. A negative analyst report on Thursday dealt a major blow to the leading electric vehicle (EV) purveyor, and the US President gave his backing to the United Auto Workers (UAW) in its attempt to unionize the company run by Elon Musk.
The US equity market is surging late Friday as both the S&P 500 and NASDAQ Composite add more than 1%, with the Dow Jones sitting just beneath that level.
Tesla stock news: $146 price target a black mark on Tesla stock’s outlook
HSBC analyst Michael Tyndall surprised shareholders on Thursday with his Reduce rating (HSBC speak for Sell) on top of a $146 price target. Tyndall’s research did not treat Tesla as a poor investment, and in fact he admitted that Tesla largely fulfills its ambitious promises over the long run.
The problem, as Tyndall sees it, is that Tesla’s valuation appears to be based on several major investments that won’t acrue to the bottom line until the end of the decade. These include Tesla’s long-hyped fully autonomous software that is likely to require a subscription, its Optimus robots and its emerging Dojo supercomputer service.
Tesla is publicly aiming for production of 20 million vehicles annually by the end of the decade, but Tyndall says this is likely too ambitious based on the current trajectory of the worldwide transition to EVs. For comparison, that figure is about twice the current level of both Toyota (TM) and Volkswagen (VWAGY) – the two largest auto companies.
Additionally, Tyndall said that CEO Elon Musk presents “single man” risk. This is not a knock on Musk’s forays into multiple other ventures such as Twitter ,but that the company’s valuation may rely too much on Musk leading it. If something were to happen to Musk, the market’s enthusiasm for Tesla stock could plummet.
Another worry for shareholders is not new. President Joe Biden met with UAW autoworkers on Thursday and put his bully pulpit behind that union’s strategy of seeking to unionize Musk’s company, as well as Toyota. The UAW is coming off a string of wins against Ford (F), Stellantis (STLA) and General Motors (GM) last month, and Biden was effective at providing the UAW’s strike with direct political support.
The market may not pay much attention to the danger of unionization to profit margins as the UAW already failed to unionize Musk’s California factory before and is sure to have more trouble unionizing Tesla’s other production hubs in Nevada and Texas.
EV stocks FAQs
Electric vehicles or EVs are automobiles that use rechargable batteries and electric motors to accelerate rather than internal combustion engines (ICEs). They have been around for more that 100 years, but battery technology research & development was meager for much of the 20th century. Lithium-ion battery technology became advanced enough to produce EVs at scale in the late 1990s and 2000s, and sales have been steadily increasing since then Tesla’s Roadster was unveiled in 2008. EVs are viewed as a means of reducing carbon emissions since battery electric vehicles (BEVs) themselves produce zero emissions. Other vehicles called plug-in hybrid electric vehicles (PHEVs) utilize both battery electric power and ICEs as a backup.
EVs are growing from a small base, but they rose from 9% of global new auto sales in 2021 to 14% of the total in 2022. This was a 65% YoY growth rate, and the industry delivered 10.2 million EVs worldwide in 2022. Projections show this number climbing above 16 million in 2023. Across the world, market shares differ greatly among nations. Nearly 88% of Norwegian new car sales in 2022 were EVs. On the other hand, the United States, where much of the modern innovation in EVs was forged, had less than 8% of new vehicle sales go to EVs in 2022. The largest EV market in the world, China, saw 30% of the market go to EVs that year.
We know you’re thinking Elon Musk, but he’s probably more like the father of the mass-market, contemporary EV. All the way back in 1827, a Hungarian priest named Anyos Jedlik invented the electric motor and used it the following year to power a vehicle of sorts. French scientist Gaston Planté invented the lead-acid battery in 1859, and German engineer Andreas Flocken built the first true electric car for the public in 1888. EVs made up about 38% of all vehicles sold in the US around 1900. They began losing market share rapidly after 1910 when gasoline-powered vehicles grew much more affordable. They largely died off until new research programs in the 1990s led to gradual private sector investment in the 2000s.
China’s BYD is by far the largest manufacturer of EVs in the world. In 2022 it sold 1.8 million EVs and in the second half of the year made up 20% of the global market. The asterisk given to BYD is that the vast majority of these vehicles are hybrids. Tesla’s 12% market share is often treated as more significant than BYD, because it only sells BEVs and is the most famous EV brand in the world. Volkswagen, BMW and Wuling then round out the top five. As a new sector with heavy investment though, many startups have flooded the market. These include China’s Nio, Li Auto and Xpeng; a Swedish-Chinese manufacturer called Polestar; and Lucid and Rivian from the US.
Tesla stock forecast
Tesla’s weekly chart showcases just how important the $210 level is for bulls. Tesla stock has already dropped below it on several occasions over the past two weeks, so the willpower is there for a move lower. The $210 level’s significance comes from its supportive posture in the summers of 2021 and 2022. It then became resistance in February of this year before slowing down a share price plunge in August.
The 8-week Simple Moving Average (SMA) is also on the cusp of breaking below the 30-week SMA, and that move will signal to traders that the autumn pullback is not over. A major weekly close on Friday or next week well below the $210 level could have traders heading for the exits. Below that support, the $160 level that held up multiple times in April is the next best bet. That price tag would mean a 24% haircut though from current price action.
TSLA weekly chart