Tesla continues to underperform: Make or break levels are approaching

Tesla (TSLA) has corrected by over 15.50% over the past 30 days, despite showing relatively positive Q4 2023 numbers.

The “Services” segment grew 37% compared to Q3 2023, whereas the “Energy and Storage” segment surged by 54%.

However, Trading.biz analyst Rahul Nambiampurath has identified the key reasons why TSLA — the stock has corrected by 34.16% year-to-date.

“Tesla’s year-on-year profits for 2023 have declined by 23%, which is one of the primary reasons for the stock’s underperformance,” mentions Raul. These lacklustre figures have also impacted overall earnings and per-vehicle profitability, believes the analyst.

Here are some of the other secondary and tertiary reasons for TSLA’s disappointing numbers in 2024:

• Aggressive price cuts
• Rising competition from the likes of BYD
• Declining market share in Europe, to the tune of 4.8%
• Margin deterioration led by declining COGS or Cost of Goods Sold

Tesla (TSLA) closing in on key levels

Here is Rahul’s short-term analysis:

TSLA breached the lower trendline at nearly $231, dipping to $161. It is currently trading at $163.57, lower than the key trendline. At present, the only critical support exists at $159.5. If this level is breached, we can expect TSLA to correct further, even towards the $107 mark.

TSLA daily price chart: TradingView

The only glimmer of hope is the hidden positive RSI divergence, with the price action making lower lows and the RSI forming higher lows, signifying weakening bearish momentum. Rahul expects sideways momentum for a while before Tesla releases the Q1 2024 earnings report in April 2024.

Impact on key funds and competitors

Tesla’s underperformance has triggered a sell-off in several top funds. This includes the T-REX 2X Long Tesla Daily Target ETF (TSLT), down 60.02% year-to-date. TSLT has TSLA at a 60.83% weightage.

Here are some of the other key funds and their TSLA-specific weights:

• Meet Kevin Pricing Power ETF: 15.80% weightage
• Consumer Discretionary Select Sector SPDR Fund (XLY): 12.05% weightage
• Vanguard Consumer Discretionary ETF (VCR): 10.67% weightage
• ARK Autonomous Technology & Robotics ETF (ARKQ): 9.26% weightage
• ARK Innovation ETF (ARKK): 7.29% weightage
• First Trust NASDAQ Global Auto Index Fund (CARZ): 18.2% weightage
• VanEck Vectors Low Carbon Energy ETF (SMOG): 16.6% weightage
• First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN): 16.0%
• ARK Web x.0 ETF (ARKW): 12.4%
• Invesco QQQ Trust (QQQ): 1.5%

Tesla’s underperformance has been good news for some of its immediate competitors, like General Motors (GM), which is up 12.87% year-to-date.

Rahul believes the sharp price correction might be good news for value buyers, as key analysts are still bullish on Tesla.

For instance, Adam Jones, Lead Operations Associate at Morgan Stanley, maintains a price target of $380 for TSLA.