Tesla shares are falling and this market wizard is worried

Tesla (TSLAThe stock is falling after its second-quarter financial data on Wednesday, as investor concerns about falling gross margins outweigh the global electric-car giant’s earnings and battering revenue numbers.


David Ryan, a three-time Champion of American Investing and a former portfolio manager under International Development Bank founder Bill O’Neill, said, IBD Live Friday that Tesla’s mighty race may be over.

On the daily chart, Tesla stock has made three big moves since June 21, Ryan said. However, the last movement, on 3 July, occurred at lighter volumes. Then, the pullback occurred on Thursday with above-average trading volumes.

“That tells me this move might be a little over the top,” Ryan said.

Tesla stock fell more than 1% to 260.01 on Friday as the market traded. On Thursday, the TSLA fell 9.7% to 262.90, falling below the 21-day line but only giving up July’s gains.

Tesla’s stock decline began late Wednesday after Tesla reported second-quarter earnings. The EV company reported that operating profit was down 2.6% year-over-year despite a 47% jump in revenue.

Ahead of the earnings, Kathy Wood sold off slices of her company’s Tesla holdings in back-to-back sessions, offloading more than 73,000 shares this week before the electric car giant announced its second-quarter financial data on Wednesday.

Can’t Watch This

Irusha Peiris, portfolio manager at O’Neil Global Advisors, added Friday on IBD Live that he sold some of his position in Tesla stock when it broke below the 21-day line on Thursday.

“I don’t think I can watch that much right now,” Peiris said. “It’s definitely disappointing.”

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Peiris added the best case scenario for TSLA now is that it holds the 10-week streak and builds a new base.

It’s definitely not in the same category nvidia (NVDA) or a from Broadcom (AVGO), Peres said.

Tesla shares: Elon Musk calls margins a ‘ridiculous’ drop

Tesla’s total gross profit grew 7% to $4.53 billion in the second quarter. Meanwhile, gross gross margins posted 18.2%, down from 19.3% in the first quarter and a 682 basis point decline year-over-year. Automotive gross margins, excluding regulatory approvals and leases, were 18.1%, down from 18.3% in the first quarter.

That’s less than the 20% gross margin that Tesla previously targeted. Before the earnings, a slew of analysts rang warning bells on gross margins.

“The short-term differences in gross margins and profitability are really slight compared to the long-term picture,” CEO Elon Musk told investors on Wednesday.

“The autonomy would make all of those numbers look ridiculous,” he added during the second-quarter earnings call.

Tesla stock

TSLA stock is significantly extending from the base of a cup with 207.79 buy points. According to the report, shares have jumped more than 130% so far in 2023 Leaderboard analysis.

Tesla is now running on a deeper cup base going back to September 2022 with 313.80 buy points.

Technically, Tesla now has a handle on the weekly chart, showing 299.29 buy points. But a slightly deeper dip or pause can create meaningful processing. This handle could end up evolving into a new base with broader consolidation. An extended handle or new base will give the moving averages more time to catch up with the TSLA stock price.

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Tesla stock ranks third in IBD Automotive Group. It has a composite rating of 98 out of 99. Tesla has a 95 relative strength rating and its EPS rating is 94 out of 99.

Please follow Kit Norton on Twitter @employee for more coverage.

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