Electric vehicle maker Tesla has long divided opinions, with its sleek vehicles and visionary but controversial CEO Elon Musk drawing equal shares of praise and criticism. This polarization is reflected in the company’s stock price, which has experienced wild swings over the past two years as bulls and bears battle it out.
After plunging during the 2022 bear market then more than doubling off its lows by early 2023, Tesla shares have fallen nearly 30% since mid-December as enthusiasm has recently cooled. According to seasoned chart analyst Bruce Kamich, this pullback comes as no surprise – he accurately predicted in early January that the stock would decline as technical indicators flashed warning signs of “more risk than upside.”
Tesla Dominated a Fledgling EV Market, But the Competition is Catching Up
Tesla deserves credit for almost single-handedly creating the premium electric vehicle category, targeting tech-savvy early adopters rather than just environmentalists. By focusing on performance and an exceptional driving experience, its sleek Model S, Model 3 and Model Y turned EVs mainstream and kickstarted the industry’s pivot away from internal combustion engines.
The company reaped handsome rewards, delivering $25 billion in Q4 2022 revenue on the back of strong demand. Wall Street expects profitability to continue increasing, with earnings per share potentially reaching $3.12 in 2024. Tesla has led and continues to dominate EV sales in America, accounting for around half of total volumes.
However, the industry landscape is evolving rapidly now as Tesla’s success has drawn virtually every major auto manufacturer into the space. While the startup retains pole position for now, its first-mover advantage is eroding quickly. Established carmakers like Mercedes and Ford have financial muscle, manufacturing know-how, and brand equity that poses an increasing competitive threat.
Tesla’s Market Share and Profitability Are Sliding as Competition Intensifies
The growing competitiveness of the EV space is already impacting Tesla’s growth trajectory and financials. According to industry tracker Cox Automotive, the company’s share of the US EV market dropped from 62% in early 2022 to just 50% by Q4 last year as alternatives eat into sales. And with Musk himself cutting prices to kickstart demand, profitability has taken a significant hit – Q4 earnings tumbled 40% year-over-year despite only 3% revenue growth.
With its iron grip on the nascent EV industry clearly loosening faster than most expected, it is understandable that Tesla’s stock has plunged over 30% in the past couple of months. Bruce Kamich’s technical analysis suggests there may be more downside to come.
Veteran Analyst Issues Dire Outlook for Tesla Stock
With over 50 years studying price trends and charts under his belt, Kamich boasts an impressive track record of accurately gauging market sentiment and future direction. His early January call for Tesla shares to decline has proven prescient so far in 2023.
And his latest assessment based on updated technical indicators remains cautious as more weakness appears to be in store. Kamich points to a bearish ‘death cross’ pattern, with the 50-day moving average falling below the 200-day to signal gathering negative momentum.
Furthermore, volume trends reinforce the bearish picture, with heavier selling pushing on-balance volume lower alongside a negative MACD reading. Based on his proprietary analysis of daily point-and-figure charts, Kamich warns that Tesla stock likely still has further to fall and sets a downside target of $150 – more than 35% below current levels.
“Tesla is looking poised for further declines,” he concludes, advising investors, “avoid the long side.”
The Road Ahead for Tesla and the Electric Vehicle Industry
Having spearheaded the creation of the premium EV segment and enjoyed a multi-year headstart over legacy automakers, Tesla now faces its stiffest test yet as the competitive landscape intensifies quickly. With most major manufacturers now firmly onboard the electric bandwagon, consumers have an expanding array of compelling alternatives to choose from.
Tesla retains strengths in technology, brand power and loyal supporters. However, rivals are pouring tens of billions into this space with the intention of claiming their share of the fast-growing pie. Toyota, Volkswagen, GM and Hyundai-Kia each target selling over a million EVs annually within a few years as the wheels of the auto industry grinding slowly but surely towards electrification.
As the company’s hitherto dominance erodes in the face of this onslaught, cracks are beginning to appear – smaller market share, slowing growth and sliding earnings. And the pain is being felt by Tesla stockholders, with shares down over 60% from their peak.
Veteran technical analyst Bruce Kamich, who foresaw the recent pullback, believes the bottom is still some way off and warns of 35% more losses potentially in store. While Tesla’s longer-term fortunes may ultimately prove brighter, the road ahead promises to remain intensely competitive and bumpy. The coming years will test the company’s mettle like never before.