Despite missing analyst estimates on both revenue and earnings per share for Q1 2024, Tesla’s (NASDAQ: TSLA) share price surged 13% after-hours. This seemingly contradictory response can be attributed to two key factors.
Firstly, the company faces significant headwinds. Tesla reported a 9% year-over-year decline in revenue, its steepest drop since 2012. Profitability also plunged 55%, and free cash flow turned negative due to rising capital expenditures and inventory buildup. Additionally, slowing global EV sales and increased competition, particularly from Chinese manufacturers, continue to pressure Tesla.
Secondly, a glimmer of hope emerged for investors. CEO Elon Musk announced plans to accelerate the production of new, lower-cost electric vehicle models. This could potentially address slowing demand and reignite growth. Additionally, Musk’s continued focus on autonomous vehicles, showcased by the unveiling of a robotaxi ride-hailing app, hints at future revenue streams.
Technical Analysis
The 4-hour shows that despite the after-hours jump, the technical picture remains bearish. The share price is poised to open below the key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], all currently sloping downwards. A gap-and-go scenario could face resistance at $184.50. A successful break above this level, with significant volume, could target $226.38 and $265.19.
The RSI (31.05) suggests room for a short-term bounce. However, a failed recovery could see a decline towards the $138.80 support level. A confirmed break below this level would expose the four-year low of $101.81.
Summary
Despite Tesla’s disappointing Q1 financials, the announcement of accelerated plans for new affordable models ignited optimism among investors, resulting in a 13% surge in share price. While technical indicators suggest potential short-term bullishness with resistance levels at $184.50, while the $138.80 support level could come into play should the push higher be short-lived.
Sources: TradingView, Trading Economics, Reuters, Tesla, CNBC, BBC.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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