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Nasdaq 100: How much further can the Tesla share price rise?


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Can Tesla’s share price extend its 83% year-to-date gains?

Tesla logoSource: Bloomberg
 
 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 24 March 2023 

Can Tesla’s share price extend its 83% year-to-date gains?

As Tesla triggered a price war in China by offering hefty discounts to its customers, threatening to undercut its competitors and potentially driving them out of business, the company’s share price continues to advance and is currently trading around 83% higher than at the beginning of the year.

Back in October the electric vehicle (EV) manufacturer reduced its car prices in many countries but did so again in January in China, making Tesla cars there 14% cheaper than they were a year ago, with some models now costing nearly half of what they retail for in the UK.

The heavy discounting forced its local rivals such as China’s Xpeng and Nio as well as major international brands like Mercedes, Volkswagen and Ford to follow suit, making the latter’s cars in China nearly a third cheaper than in the US.

Tesla’s recent price cuts came after nearly two years during which it had been raising its EV prices as it struggled to keep up with demand.

According to Bloomberg news “the China Association of Automobile Manufacturers called for an end to the price war on Wednesday, saying that it wasn’t a long-term solution to a slowdown in sales and accumulation of inventory, and that the industry should “return to normal operation” to ensure its healthy development.”

Consumer spending in China has been badly affected by long-running Covid restrictions, while sales have also been impacted by the removal of state subsidies on EV purchases at the end of last year.

Nonetheless, according to Bloomberg news, retail sales of electric vehicles (fully electric and plug-in hybrids) almost doubled to 5.67 million last year with Tesla shipping a monthly record of over 100,000 EVs from Shanghai in November.

Only a month ago Tesla’s CEO Elon Musk said the company is on track to produce 2 million cars this year and is seeing the strongest ever orders year-to-date, boosting its share price.

How to trade the Tesla share price?

Refinitiv data shows a consensus analyst rating of just about ‘buy’ for Tesla – 8 strong buy, 14 buy, 16 hold, 2 sell and 2 strong sell - with the median of estimates suggesting a long-term price target of $210.00 for the share, roughly 6.5% above where the share is trading (as of 23 March 2023).

Tesla RefinitivSource: Refinitiv


IG sentiment data shows that 74% of clients with open positions on the share (as of 23 March 2023) expect the price to rise over the near term, while 26% of clients expect the price to fall whereas trading activity over this week showed 52% of sells and this month 50% of buys.

IG sentimentSource: IG

Technical analysis on the Tesla share price

This year’s rally to Tesla’s $217.65 February high has been followed by a retracement back to the 55-day simple moving average (SMA) which offered support at $163.91 in mid-March before the share resumed its ascent and rose by around 20% with it currently trying to break through its September-to-March downtrend line at $196.50.

If it were to rise above the downtrend on a daily chart closing basis, the February high and 200-day simple moving average (SMA) at $216.95 to $217.65 would be back in the picture, a rise of some 11% or from recent levels (as of 23 March 2023).

In this scenario the November peak and 2022-to-2023 downtrend line at $237.40 would represent the next upside target.

Tesla Daily Chart

Tesla Daily ChartSource: Tradingview


Short-term upside pressure is expected to remain in play while the Tesla share price stays above Monday’s $176.35 low on a daily chart closing basis. Below it support can be seen along the 2023 support line and 55-day SMA at $174.50 to $173.51 as well as at the recent $163.91 March low.

Were the $163.91 low to unexpectedly give way, the resumption of the 2022 descent would likely take place and push the Tesla share price back towards its January 2023 low at $101.81.

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