Tesla Stock Price Risks Deeper Pullback as Bearish Pattern Emerges

Key Insights

• Tesla stock formed a bearish double-top pattern.
• Analysts projected downside despite recent gains.
• Valuation concerns continued to weigh on sentiment.

Tesla stock price retreated in recent sessions after failing to sustain gains near its yearly highs. Shares fell from a May peak to around $415, raising concerns that a broader correction could follow. The decline coincided with growing analyst caution and renewed questions about Tesla’s valuation.

Investor sentiment weakened as technical signals and fundamental concerns aligned. While Tesla remained one of the most closely followed stocks in the market, analysts increasingly focused on slowing growth rates, rising competition, and premium valuation multiples.

Tesla Stock Price Flashed A Bearish Technical Signal

The daily chart reveals that the TSLA stock price has crashed in the past few days. It has moved from a high of $452 in May to the current $415. A closer look shows that the stock will have more downside to go as it has formed the risky double-top pattern. This pattern is made up of twin peaks and a neckline, which, in this case, is at $391.

The Relative Strength Index (RSI) has moved from the overbought level of 73.5 to the current 50. In most cases, a falling RSI indicator sends a signal that an asset will continue the downward trend.

The distance between the upper side of the double-top and its neckline is $61. Subtracting this from the neckline gives a target price of $330, which coincides perfectly with the lowest point in April this year. It is also slightly higher than the 50% Fibonacci Retracement level.

Wall Street Analysts are Bearish on TSLA Stock

The ongoing Tesla stock retreat has come at a time when Wall Street analysts have maintained a bearish outlook for the stock. The consensus target among analysts is $395, down slightly from the current $415.

In a recent note, a UBS analyst lowered his target for the TSLA stock to $364, while maintaining his neutral rating. Barclays also has a neutral rating for the stock with a target of $375.

Philip Securities has a sell rating for the stock with a target of $215, while Zacks Research has a strong sell.

There are numerous reasons why analysts are cautious about Tesla stock. One of the minor ones is that Bitcoin price continues to drop this week. It dropped below $70,000 as spot Bitcoin ETFs continued their outflows. They have now shed close to $3 billion in assets in the past few weeks. Tesla holds 11,509 coins worth over $805 million. These holdings were valued at $1.45 billion when the coin jumped to a record high.

There are also the perennial concerns that Tesla is highly overvalued. Data shows that Tesla does not trade as other automakers do. The company has a forward P/E ratio of 203, much higher than the sector median of 15. Also, based on the GAAP metrics, it has a multiple of 314.

Ideally, it is common for good companies to have these premium valuation multiples, especially when they are experiencing strong growth. Tesla is not doing that as its revenue growth has stalled as competition rises.

Indeed, analysts believe that Tesla’s annual sales will grow by 9% this year and 15% next year. In contrast, NVIDIA, whose revenue is expected to grow by 81% this year and 40% next year, has a PE multiple of less than 25.

Tesla stock has also slumped as investors turn to traditional automakers, especially Ford. Ford stock has gone parabolic and reached $17, up by 60% from its lowest point this year. This growth is because Ford has started to expand its business to other areas like energy storage for the AI industry.

In summary, Tesla stock has formed a highly bearish chart pattern known as a double-top, signaling that it will have a bearish breakout in the coming weeks or months. It also has weak fundamentals as competition rises and revenue growth slows. These factors mean that it will likely have a strong bearish breakout over time.

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