Tesla Posts Strongest Session Since January 2022: Is A Trend Reversal Underway?

Shares of Tesla Inc. TSLA experienced a remarkable 12% increase on Wednesday, marking the strongest session for the electric vehicle (EV) maker since January 2022.

This surge occurred despite the company's Q1 2024 earnings falling short of Wall Street expectations in both earnings and revenue. Investors were seemingly encouraged by Tesla’s commitment to launching more affordable models, aiming to broaden its market reach and potentially boost future revenues.

Adding to the positive sentiment, Tesla received an important endorsement from Bank of America, which upgraded its rating on the stock from Neutral to Buy. Analyst John Murphy highlighted Tesla's ability to address recent challenges effectively.

He noted that although the company faced slower volume growth, lower prices may offer more demand incentives, and while margins are expected to be hit, cost-saving efforts have led to better-than-expected results.

Read also: 8 Tesla Analysts Size Up Next-Gen Vehicles, FSD, AI And More: ‘Potential To Be A Transformational Technology Company, Deliver Outsized Returns’

Additionally, Murphy underscored several positive catalysts poised to enhance Tesla’s market position:

1. Tesla is accelerating the launch of new and more affordable models, which are expected to hit the market sooner than previously anticipated.
2. The eagerly awaited Robotaxi event scheduled for Aug. 8 will highlight Tesla’s advancements in Full Self-Driving (FSD) technology and introduce its next-generation platform.
3. The company is aiming to achieve over $1 billion in cost savings through planned operational efficiencies.
4. Tesla is exploring opportunities to license its FSD technology to one or two major original equipment manufacturers (OEMs) by year’s end, opening new revenue streams.

Tesla Technical Analysis: Rebound From Oversold Levels, Bulls Eye 50-Day Average Test

From a technical perspective, Tesla has shown a robust recovery from oversold conditions, as implied by the relative strength index (RSI) before its earnings release.

The stock is currently trading 9% below its 50-day moving average at $176, which might act as a near-term target for investors betting on a trend reversal.

A significant level to watch is $207—the price at which Tesla closed before experiencing a 12% drop following the Q4 2023 earnings report.

Reaching this threshold would mark a 50% increase from April’s lows. However, achieving this level depends heavily on greater clarity and positive developments regarding new model launches, the Robotaxi venture, and overall market sentiment moving forward.

However, stronger competition in the EV sector, delays or setbacks in Tesla’s new business lines, or a broader shift in risk sentiment could maintain bearish pressures on the stock.

Wall Street analysts have set an average price target of $185 for Tesla, with predictions ranging from a high of $310 to a low of $68.

Now read: Cashing In On Tesla’s Post-Earnings Bounce–Ben Graham’s “The Intelligent Investor” Is No Guide Here

Image generated using artificial intelligence via Midjourney.