Tesla’s battery day – a disappointment

September 29, 2020 12:00

The highly anticipated "Battery Day" didn't play out for the Tesla stock as expected. While Tesla and its CEO Elon Musk certainly stood out with its impressive technology plans, capacity and cost targets, some of Musk's promises lacked substance. In fact, Musk himself acknowledged that the ambitious technology is proving "Insanely difficult" to manufacture at high volume.

But with Musk failing to deliver anything really new on "battery day", and instead promising a $25,000 car which he has been discussing for the past three years and which comes with a risk, Tesla's market capitalization of still more than 400 billion USD seems a bit elevated compared to its competition.

Tesla loses its advantage over competition like VW

The disappointment among market participants can already be seen in the sharp drop in Tesla's stock in the days following battery day, with the stock dropping below 400 USD per share again.

And we expect further losses in Tesla's stock ahead as the signs of a bubble in Tesla's stock price are still clearly visible:

  • According to Bloomberg data, global car companies currently see sales of around 2.3 trillion USD – ex-Tesla
  • These companies have a $100 Billion EBIT and a market capitalization of around 805 – 810 billion USD - combined
  • While Tesla has a market capitalization of more than 430 billion USD (half of what all other car companies have in market cap combined), it saw sales in 2019 of only 25 billion USD and no EBIT since Tesla does not make any money (at least not yet).

Some might argue now that Tesla made money in the last four quarters, but only because of profits made from regulatory credits which Tesla receives for selling electric cars, some of which they sell to other carmakers.

While Tesla certainly had an advantage, compared to its competitors like VW, when starting from scratch without having to make an internal combustion engine car into an electric car, over the next years, Tesla, and all other electric carmakers, can expect only incremental gains in battery efficiency.

And as VW has introduced their ID.4 sport utility, which is said to sell thousands less than the Tesla Model Y SUV and as Tesla is still struggling to at least deliver a previously promised $35,000 Model 3 sedan, we see rough times for Tesla stock ahead.

How can you trade #TSLA in this environment?

Technically, the mode for #TSLA remains bullish above the SMA(200), but a break below 330.00 USD can be considered a clear bearish sign, making a test of the February lows and at least a short-term push to below the SMA(200) towards 195.00 USD very likely.

Such a bearish scenario will be negated with #TSLA if bulls regain control and push the stock back to above 460.00 USD – a scenario which would come as a surprise given the bearish seasonal window which the broader US equity market just entered on the 21st of September that likely will last until the US presidential election at the beginning of November:

Source: Admiral Markets MT5 with MT5SE Add-on #TSLA chart (between April 30, 2019, and September 28, 2020). Accessed: September 28, 2020, at 10:45 AM GMT - Please note: Past performance is not a reliable indicator of future results or future performance.

In 2015, the value of #TSLA increased by 7.7%, in 2016, it decreased by 7.4%, in 2017, it increased by 44.9%, in 2018, it increased by 6.7%, and in 2019, it increased by 36.7%, meaning that in five years, it was up by 87.7%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level than with MetaTrader 4. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.