Tesla's Stock Remains Steady Despite Another Downgrade
AInvestSaturday, Jul 27, 2024 2:07 am ET
2min read
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In Friday's early trading, Tesla's stock saw a spike, climbing over 2% despite a fresh downgrade by an analyst. By the close of trading, however, the shares had barely moved, ending the day down just 0.2% at just under $220. This occurred against the backdrop of the S&P 500 and Dow Jones Industrial Average climbing 1.1% and 1.6%, respectively.

The electric vehicle giant's shares are still trading around $25 or 10% below the levels seen before the company reported weaker-than-expected Q2 earnings. Post-earnings, Tesla's shares plummeted by 12% after it posted earnings of 52 cents per share, missing Wall Street's expectations of 61 cents per share, according to FactSet.

Several analysts have subsequently lowered their ratings and target prices. Barclays adjusted its target from $225 to $220, while KGI Securities downgraded Tesla to neutral. On Friday, another notch was taken down by Phillip Securities' analyst Jonathan Woo, who moved his rating from reduce to sell, and slashed his price target from $145 to $135.

Most brokerage firms categorize their ratings as buy, sell, or hold, but some use different gradations. The terms "sell" and "reduce" are quite similar, contributing to the subdued reaction in Tesla's stock on Friday.

One reason for the lack of significant movement is that this downgrade reflects factors that had already impacted the stock earlier in the week. Woo mentioned pressures from pricing, tariffs, and margins as reasons for the downgrade, adding, The management spent little time alleviating concerns over stagnation in its car business. These issues were already priced into the stock's dip on Wednesday.

Moreover, Tesla's share price has rebounded by about $5 from its post-earnings low, suggesting that while the quarterly performance was underwhelming, it wasn't as dire as feared. Mitigating factors included larger-than-expected restructuring costs from layoffs and better-than-anticipated revenue from regulatory credit sales. Tesla sells these credits because its production of zero-emission vehicles exceeds quotas. Combined, these factors meant the quarter's results nearly met analysts' expectations.

Technical support levels are also playing a role in Tesla's stock movements. Market technical analysts, like Frank Cappelleri, founder of CappThesis, look at historical buying and selling points to gauge investor behavior. Cappelleri had predicted a support level of $225 ahead of the earnings report, a mark around which the stock fluctuated over the past couple of days.

Investors are also eyeing Tesla's upcoming Robotaxi Day on October 10. They are keen to learn more about the company's progress in autonomous ride-hailing and how it plans to profit from this technology. The robotaxi and autonomous driving ventures are critical for Tesla's investors, particularly as the company's market value has surged by about $300 billion from the low in April to the second quarter, driven by optimistic forecasts for its autonomous driving business. The quarterly report, while subdued, has not drastically altered expectations for the robotaxi's prospects.


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