stock is falling after the third Wall Street downgrade in as many days, but analysts are turning negative just as a technical indicator is turning positive.
Friday, DZ Bank analyst Matthias Volkert double downgraded Tesla to Sell from Buy, skipping a Hold rating, according to Fly on the Wall, a stock ratings and news aggregation site. Most downgrades are one notch at a time, so going to Sell from Buy, or Buy from Sell, is relatively rare. His price target is $210 a share.
Barron’s hasn’t seen the report from the German bank, so the specific reasons for the cut aren’t apparent. The stock may have just run too much higher, too fast for Volkert. While Tesla stock was below his price target less than three weeks ago, it is now 26% above it, closing at $264.61 Thursday.
Valuation has factored in two other downgrades coming in the past couple of days. Thursday, Morgan Stanley analyst Adam Jonas wrote that recent gains brought Tesla stock to “a fair valuation.” He cut his rating to Hold from Buy.
Barclays analyst Dan Levy made the same change on Wednesday, saying that near-term fundamentals for the car industry are still a little shaky. Interest rates are high, affecting car demand, which is leading Tesla to lower prices, pressuring its profit margins.
Advertisement – Scroll to Continue
The Friday downgrade has shares down 0.6% in premarket trading, at just below $263, while futures on the
and Nasdaq 100 were off 0.4% and 0.5%, respectively.
Including early Friday trading, Tesla stock is down about $11 after all three downgrades. That still leaves shares up 42% over the past month.
One of the factors offsetting worsening analyst sentiment is a coming “golden cross.” That’s a technical stock market indicator referring to a shorter-term moving average crossing over a longer-term moving average. It signals that investors are becoming more upbeat.
Advertisement – Scroll to Continue
The most significant cross for traders is when the 50-day moving average crosses over the 200-day. That will happen Friday. The 50-day moving average will end the day at roughly $196.50, while the 200-day will be about $195.50. It’s the first time the 50-day average will exceed the 200-day since May 2022.
That’s good news for traders, but shares are still “overbought,” based on their relative strength index, an indicator that tracks a stock’s momentum. Tesla’s 14-day relative strength number is almost 90, reflecting its recent surge, while traders consider something overbought above 70. An RSI that high is a sign there is too much optimism reflected in a stock price.
“Tesla now has been overbought for all of June,” says CappThesis founder and technical stock market analyst Frank Cappelleri. “While we know that can’t continue, it’s lasted longer than many thought possible. This is a classic example of the saying that overbought can stay overbought.”
Advertisement – Scroll to Continue
People can say optimistic longer than many expect. That’s often the case with Tesla.
Cappelleri doesn’t have a Tesla rating. He watches chart patterns to get a sense of where stocks go over the short and medium term.
As for traditional analysts, about 41% of analysts covering Tesla stock now rate the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $204, up roughly $10 in recent days, but still about $60 below where the stock is trading.
Write to Al Root at allen.root@dowjones.com
…
Read More: Tesla Stock Catches a Double Downgrade
