Tesla stock chart image shows a ‘double top formation’
The Twitter purchase can put Musk in trouble
headlines around Elon Musk don’t tear off
At the beginning of the year, Tesla shares were still above US$1,200, then fell below the US$800 mark in mid-March, before the price temporarily rose to over US$1,000 again. Since April 22, the paper has been in a downward trend again, on May 10 a negative trend began at a price of 800.04 US dollars. In mid-May, Tesla shares even slipped into the prominent support area of just over $600.
The earnings forecasts are lower than seven weeks ago. Tesla has been classified as a high-risk stock since April 26. The relative “underperformance” compared to the S&P 500 over the past 4 weeks is approximately 20 percent.
Important for the analysts: the imminent crossing of the 50-day and 200-day price averages
As of May 23, the 50-day moving average of around $922 was still just above the 200-day moving average of around $913, but they are converging. The electric car maker has “a medium-term breakthrough below the January low [von 792 US-Dollar] Defined support confirmed,” Fairlead Strategies managing director Katie Stockton told Barron’s. The downtrend could continue into the summer, the analyst said of the long-term indicators, the chart showing a “double-top” or “M” Formation The support is now at 540 US dollars, the analyst continued – this corresponds to a further price loss of almost 29 percent (as of May 31, 2022).
However, the share started a counter-movement before the long weekend in the USA due to the public holiday, the price rose to 758.26 US dollars (closing price: May 31, 2022) – an indication of a premature trend reversal.
A whole series of stressful factors: First and foremost, the Twitter purchase
The Twitter takeover weighs on the Tesla share price in several ways. The Tesla price collapsed by 12 percent the day after the announcement. The financing of the acquisition remains unclear to many investors, Gary Black, founder and managing partner of ETF Future Fund LLC, told Bloomberg. Investors worried that Musk would have to sell more Tesla shares and that Tesla as a company could no longer be given the attention it deserved.
This is where investors could see a “key man risk.” Wedbush analyst Dan Ives writes that the situation around Tesla has taken on a life of its own, with investors wanting to see Musk focus on the challenges at Tesla.
Alongside this, there has been a flurry of headlines and tweets over the past few weeks showing the impact on the stock market:
The company’s most productive plant, the Gigafactory in Shanghai, was affected by the renewed lockdown: capacity was temporarily reduced significantly due to the Chinese government’s zero-COVID policy. As Reuters recently reported, the planned hiring of additional employees in Shanghai has also been postponed.
S&P analyst Margaret Dorn justified the listing from the sustainability index of the S&P 500 with allegations of racism, complaints about poor working conditions in the Gigafactory in Texas and the sometimes fatal accidents with the autopilot.
The documentary film “Elon Musk’s Crash Course” produced by the New York Times also deals with the accidents in connection with the driving assistant, which made for further negative headlines. According to the latest reports, the US Securities and Exchange Commission is also investigating Musk regarding his entry as a major investor on Twitter.
In addition, the market sell-off and inflation are weighing on Tesla stock. Analysts, such as Colin Langan from Wells Fargo, give the reason for Tesla’s downgrade as well as the rising commodity prices, such as lithium, which is necessary for the production of batteries.
The historically unique valuation of Tesla stock and the Twitter deal
According to investing.com, Bernstein analyst Toni Sacconaghi also rates Tesla shares as underperform with a target price of $450 per share. Tesla’s high valuation to date is historically unprecedented because it implies “industry-leading profitability going forward.” Since the Twitter deal has not yet been completed, various scenarios are possible, which Toni Sacconaghi calculates accordingly: If the share price of the electric car manufacturer falls below the 500 US dollar mark, Musk would pay around 2.5 billion US dollars for the Twitter Purchase (at the original price) missing. If the purchase price were reduced by 10 percent, Musk would have sufficient financial resources, even if the Tesla price subsequently collapsed to $400. In the most unlikely event that Twitter’s purchase went through in full and Tesla’s share price fell below $400, Musk would be forced to sell approximately 13 million shares of Tesla, which constitutes a “margin call.” ” same kme. Ultimately, it could be crucial for Tesla how the Twitter takeover continues.
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