Sign InTesla's Mixed Outlook Signals Short-Term Recovery and Long-Term Growth Amid Lawsuit Concerns
Summary
Tesla's stock (TSLA) has seen a drop in price and is considered overvalued based on its PE ratio, but the discounted cash flow valuation suggests that it may be slightly undervalued, while technical analysis indicates potential for a short-term recovery and long-term growth, although caution should be exercised due to a pending lawsuit and high PE ratio. (August 04, 2023)
Fundamental Analysis
Tesla, Inc. (TSLA), traded on NASDAQ, has undergone some turbulence, evidenced by the stock's latest close at $253.86 as of August 04, 2023, a 2.11% drop from its previous trading day. The company has exhibited a significant trading volume of 98.25 million shares, albeit lower than its average volume of 134.60 million shares.
With a market capitalization of $804.61 billion and around 3.17 billion shares outstanding, Tesla's EPS stands at $3.08 giving a PE ratio of 82.42, indicating that the stock is fairly overvalued. However, the discounted cash flow (DCF) suggests a valuation of around $260.24, suggesting that the market's valuation of TSLA slightly underplays its intrinsic value.
Looking at the data, Tesla has had a year low of $101.81 and a year high price of approximately $314.67. High target estimates predict a price point as high as $526.67, with a low target of $130. The median target sits at approximately $275, with a consensus target of $285.6, suggesting potential growth in the medium term.
News surrounding the company is mixed. While Tesla is facing a lawsuit over allegations of exaggerating vehicles' driving range, there are bullish arguments around Tesla's strategic core offering. For instance, Tesla's strong growth in EVs, battery storage, and impressive forecasts of annual free cash flow make a compelling case for the company's long-term potential.
Technical Analysis
From a technical perspective, TSLA seems oversold and could be heading for a bounce. The Relative Strength Index (RSI14) is at 31, which is close to the oversold condition, usually marked by an RSI reading below 30.
The stock is trading close to its 50-day moving average of $251.28, while it surpasses its 200-day moving average of $195.55, suggesting an overall bullish trend for the stock. Despite recent downturns, the longer-term trend seems to be upward, as indicated by the MACD (3-month) value of 1.11, which identifies growing positive momentum.
Future Outlook and Recommendation
Tesla's mixed fundamental outlook, coupled with oversold technical conditions and potential for growth, suggest that the stock could be poised for short-term recovery and long-term growth. However, the ongoing lawsuit and high PE ratio do introduce substantial note of caution.
Given all these factors, it might be wise to HOLD the stock at the moment due to the uncertainty caused by the pending lawsuit, while closely monitoring the unfolding events. For long-term investors who believe in Tesla's disruptive narrative and can tolerate high levels of volatility, BUY might be an applicable strategy. However, individual investment objectives and risk tolerance should always be considered.
For the next trading day (August 07, 2023), considering the oversold conditions and mixed sentiment, a slight rebound might be expected. For the upcoming week, depending on how the negative news unfolds and market sentiment shifts, the price could experience more volatility. Predicting exact prices would be highly speculative and uncertain.
