Elon Musk and Tesla Are Sinking
WASHINGTON, DC – March 19, 2019
Tesla stock has tumbled more than 17% this year with losses accelerating last week following a mediocre reception at its Model Y unveiling. It is now 29% from its record high set in September 2017.
This is probably only the beginning of a larger collapse. Tesla, the largest producer of electric vehicles in terms of capitalization, could face more problems soon, as reported on CNBC by Craig Johnson, chief market technician at Piper Jaffray.
“You’ve been stuck in a trading range for about 2½ years – $245 on the lower end, $390 on the upper end. Back in December, you lost power at $390. You’ve been backing and filling since. To me, it looks like we’re going to come back down and retest the lower end of this price channel, confirm it before you can do any sort of tactical trading opportunity with these shares,” said Johnson. “I’m waiting for it to pull back and retest that level.”
Actually, it's not that far to fall. A drop to $240 would mark a decline of about 13% from current levels of $276. The stock has not traded below that price since the beginning of 2017.
And everything would be fine, but the negativity around Tesla is not limited to technical forecasts. The company has a number of fundamental problems as Michael Bapis, managing director at Vios Advisors at Rockefeller Capital Management, notes:
“I can’t get comfortable owning it right now,” Bapis said to CNBC. “They’re really struggling with brand definition. They don’t really know who they are. They don’t know what’s the difference between them, Ford, GM, and they’re struggling with production and delivery issues. The competition is heating up.”
Bapis pointed out that Tesla's capitalization is unreasonably inflated: “They’re trading at per units sold to market cap of $120,000. Daimler and BMW trade at $30,000. So it’s four times any other market cap per units sold out there.”
At the same time, the number of Tesla's competitors has multiplied. Another German carmaker, Volkswagen, has planned to invest $9 billion in the development of electric vehicles in its Audi division. The Chinese company Nio, meanwhile, is actively capturing the Chinese market.
The attitude towards Tesla and Musk in the business media continues to deteriorate.
If TV analysts are no longer afraid to openly criticize Musk and his company, then the market narrative has changed, and the image of the “ingenious engineer and businessman” has faded.
It seems that some experts are now trying to “jump onto the last carriage of the departing train” in terms of negative forecasts for Tesla -- then they will say that they had foreseen all the problems in advance.