Tesla, Inc. (TSLA) shares extended their breakout this week and briefly tested their all-time high. Despite the company’s heavy spending and lack of profitability, investors appear confident that Tesla’s upcoming Model 3 and electric semi-truck will drive revenue higher. The passage of autonomous driving regulations could also open the door to a much larger market by letting consumers and the company’s own fleets shuttle passengers and cargo.
Despite the optimism, some analysts have expressed concerns about valuation and spending. Jefferies initiated coverage of Tesla stock with an Underperform rating and a $280 price target, which suggests about 27% downside from current levels. The Jefferies analyst believes that Tesla’s achievements have been impressive but does not see the company’s vertically integrated business model scaling up as quickly and profitably as consensus and valuation multiples imply. (See also: The Case Against Tesla.)
From a technical perspective, the stock broke out from a symmetrical triangle and rebounded from its 50-day moving average at $346.46 earlier this month. The stock more recently crossed above its R1 resistance at $380.19 and briefly touched all-time highs. The relative strength index (RSI) appears overbought at $68.12, but the moving average convergence divergence (MACD) recently experienced a bullish crossover.
Traders should watch for a breakout from the stock’s all-time high of $389.61 to R2 resistance at $404.49. With the RSI reading nearing 70.0, traders are likely to see some consolidation at these levels before a further move higher, but the MACD suggests that the long-term uptrend remains in place. If the stock moves lower, traders should watch for a move down to the 50-day moving average and pivot point at around $346.46. (For more, see: Tesla to Unveil ‘Unreal’ Semi Truck on October 26.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.