Yesterday, after the market closed, Tesla revealed its earnings report, which came with mixed results. Adjusted EPS and revenue beat the estimates, with 91 cents and $24.93 billion, respectively, compared to the estimated 81 cents and $24.51 billion. The main focus was on margins, and unfortunately, the gross margin fell to 18.2%, falling short of the estimated 18.8%.
Elon Musk mentioned that if interest rates continue to rise, the company will continue implementing price cuts on vehicles. Despite expected slowing production due to factory upgrades, Musk remains optimistic about achieving the 1.8 million vehicle production target for the year. Additionally, Tesla plans to invest in a Dojo, an in-house supercomputer, which is expected to cost at least $1 billion.
There was also concerning news as Tesla issued a recall for nearly 16,000 Model S and Model X vehicles due to a fault with seat belts, according to the National Highway Traffic Safety Administration filing. This recall, along with the margin miss, caused the premarket price to fall to $281, which is just below the uptrend line from May.
The gross margin trend has been declining, and the price has also been falling since reaching its peak in November 2021. On the logarithmic scale, there is a significant resistance level in the 300-315 zone, which was being tested prior to the earnings report. It is now possible that there might be a correction after testing this resistance zone, which includes the 2-year downtrend and major horizontal resistance.
Additionally, the relative momentum index indicator is about to give a sell signal, adding to the potential bearish sentiment.
If a correction starts, the first key support levels to watch are 270 and 252. If bears manage to control the market, downward moves could extend to the Fibonacci 38.2% level at 223.85 or the middle point of this year’s surge 200, which is also near the trendline from that point.
Despite the slightly negative outlook, in the medium to long term, Tesla could still be a good investment. Any possible correction can be viewed as a buying opportunity as long as the main narrative remains the same for US markets or specifically for Tesla.
On the other hand, for upward movements, a breakout above the 300-315 resistance zone could significantly improve the technical outlook. If such a breakout occurs, it would be wise to verify it with volume confirmation before making decisions.
