Tesla Motors Inc (TSLA) Shares Beginning Downtrend?

Updated on

Shares of Tesla Motors Inc (NASDAQ:TSLA) has recovered some of the losses sustained in early trading, where the electric car company saw its shares fall around -2.50%.  Shares have since recovered some of the losses, but are still down -1%.  However, the significant part of Tesla’s tumble this morning is the fact that it trades at a five week low and is below the 200 day moving average, a long term trend signal for technical analysts.  The last two previous trading sessions also saw Tesla’s share price fall below the 200 day moving average.  Currently, the 200 MA sits at $232.18, just a stone’s throw away from current price of $229.28.  I expect the price action to test the 200 MA at that level again in the coming days and based on the response, we will see if this is the beginning of a new downtrend or a false breakout lower.  However, shares of Tesla do have a horizontal support at $220, which should be viewed as the next target, should the 200 day moving average hold and turn from support to resistance.

Tesla Motors’ market cap

Looking at the fundamentals, Tesla Motors Inc (NASDAQ:TSLA) has a market cap of $29.02 billion and is rated a “buy” by analysts.  Price to forward earnings is at 80, price to sales is overvalued at 10.16, price to book is overvalued at 30.17, and price to cash is at 12.24.  Total debt to equity is 2.58 and cash per share tallies up to 18.91, giving the company a solid current ratio at 1.80. Earnings are forecast to climb 83% this year and 380% next year.  Sales, quarter over quarter, are up 167.50%, while earnings per share fell -87.50% during the same period.  Short sellers remain bearish, with a short float of 23%, but performance has been good: up 86% in past year and up 54% year to date.

Tesla Motors’ valuation ratios

Overall, when looking at Tesla Motors Inc (NASDAQ:TSLA)’s valuation ratios, it is apparent that the stock is certainly no undervalued diamond in the rough.  However, the growth stock does have some good earnings over the past several years and certainly earnings growth forecasted is bullish.  However, it is unclear yet whether Tesla could be entering a period of weakness.  Typically, the 200 day moving average is a strong support for an uptrend and when broken, is usually not a good sign.  Granted, we are still waiting for a retest of the $232.18 level and will have to wait and see the price action for the rest of this week to determine whether Tesla could be heading to its next support level of $220.  However, from a long term perspective, Tesla still has a very bright future and is already making a name for itself in the electric car niche industry.  Additionally, the company has ample cash reserves to deploy for growth and acquisitions, which will definitely help keep the car company competitive.

Disclosure: No positions

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!