Our Analysis of Tesla Inc. (NASDAQ: TSLA)

Last week, we took the opportunity to review the performance of our "Quantamental" analysis process.

As a reminder, our "Quantamental" approach combines technical analysis ("quantitative") and operating company analysis ("fundamental") to analyze a stock quickly.

We use it as an initial screen to see if a stock merits more work, but it is also beneficial as a standalone analysis tool. We saw this in the results of our review of our 2024 analyses, where it demonstrated strong performance.

The only "misses" the approach posted (out of sixteen companies analyzed) were on two high-flying technology stocks – Tesla Inc. (NASDAQ: TSLA) and Palantir Technologies Inc. (NASDAQ: PLTR).

In today's HX Daily, we will review TSLA; next week, we will update PLTR.

Here is the analysis…

Tesla Inc. (NASDAQ: TSLA) – AVOID

We analyzed TSLA stock as the first of our "Quantamental" analyses back on July 9, 2024, and then updated the analysis again on October 15.

Both times, our view was that investors should AVOID the stock.

We based our conclusion on the company's negative earnings revisions.

A quick reminder that "earnings revisions" are when the analysts who cover the stock have to change their estimates for earnings up or down. For most companies, we focus on the estimates for earnings per share or "EPS.”

Short-term stock price performance and the estimate revisions have a very high correlation. If the revisions are moving higher, the stock almost always follows. The opposite is also true.

Here is the chart showing revisions for 2025 EPS for TSLA over the last couple of years…

On the chart, we noted where we initially did our analysis in red. Again, our view was that the stock would likely go lower as long as earnings revisions remained negative.

Our call was a good one up until the election.

After the Trump win, though, TSLA stock exploded as investors extrapolated that the company would be a beneficiary of Elon Musk’s relationship with Trump.

This is an outside event we couldn't have predicted when we did our analysis and update. Remember, though, that our "Quantamental" approach is not a full-time stock analysis service but rather a quick analysis tool.

On the chart, we have also highlighted an interesting development. After the company reported results in November, TSLA saw its first POSITIVE earnings revisions that it has seen in almost a year.

As you can see on the chart, this sent the stock even higher.

Here is a chart showing the short-term stock price performance along with our favorite timing technical indicator – the relative strength index or “RSI” …

On the chart, we highlighted times when the stock has become very overbought with an RSI well over 70.

The first time was when we did our initial analysis. The second time is here recently.

An RSI of over 70 can signal that excitement about a stock (or a market) has become exuberant. This leaves the stock vulnerable to a period of consolidation (not going higher) in the coming months.

This is what happened in July and (along with the negative earnings revisions) was the driver behind our initial AVOID view.

How do we look at it right now?

Similarly, we think that from recent highly overbought levels, the stock is likely not to move higher and is more likely to move lower.

Here is another helpful chart to consider. This is a shorter-term stock price chart along with the 50-day, 100-day, and 100-day moving averages.

Despite a -20% pullback in the stock price, the stock is still well above its moving average. Those moving averages are still on relatively steep climbs.

Remember that the moving averages are where most folks own the stock. The 50-day moving average is the average price at which people who bought the stock in the last 50 days own it.

There is no "magic" to them, but as you trade towards the averages of the most recent holders, you usually see some support.

We think that will happen with TSLA stock. From a purely technical perspective, we believe a natural consolidation would have the stock trading between the 50-day and 100-day moving averages. The midpoint is $300 and still another -20% from current levels.

The company will report at the end of this month (January 29), which will likely be key.

Although the most recent report saw a mild uptick in earnings estimates, those estimates have decreased slightly since then. Look closely at the chart, and you will see that TSLA did see some minor upward revisions in estimates last summer, but they didn't persist.

Given the massive run in the shares and extension from the moving averages, we think this remains an unattractive position. We would continue to AVOID the shares.