The Great Tesla Debate
Who's right on Tesla stock, Deutsche Bank or Cathie Wood? Both are far from perfect, but don't underestimate the EV maker. Here's what traders should know.
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On Monday morning, Deutsche Bank DB said it expects Tesla TSLA to miss its first-quarter estimates by a “wide margin”. The Frankfurt, Germany-based investment bank lowered its price target for the stock to $218.
Deutsche Bank cited weak global EV demand, an extended ramp-up for Cybertruck, and slow Model 3 production in the U.S. First-quarter delivery estimates were lowered from 476K units to 427K.
It was the latest in a series of negative events for the Austin, Texas-based EV maker, which has lost over 55% of its value since reaching an all-time high of $409 in late 2021.
However, not all of the news on this stock is negative. Cathie Wood, CEO of ARK Invest, is maintaining a $2,000 price target on Tesla, a figure she projects will be achieved by 2027. Wood was one of Tesla’s biggest cheerleaders during the stock’s incredible run during the early days of the pandemic. In 2020, Tesla shares gained an incredible 743%.
Before we go any further, understand that both Deutsche Bank and Cathie Wood are far from perfect.
Deutsche Bank has lost over 90% of its value since 2007 (point A), and today the stock trades below its post-crash 2008 lows (point B).
Despite recent gains, Wood’s flagship ARK Innovation ETF ARKK has lost about two-thirds of its value since peaking in February of 2021 (point A).
It’s interesting to note that Tesla finished green on a day when it was downgraded by Deutsche Bank. That’s a sign that Monday’s downgrade, and the negativity that it represents, is already priced into the stock.
This means that the downside for Tesla is limited, so I’d be a buyer for a trade. The stock currently resides in a price area that has acted as support for the past two months (green rectangle).
I believe a bounce could take the stock to its 50-day moving average (blue), currently located near $203 (point A). A secondary target (point B) can be placed at the stock’s 200-day moving average (red), currently located at $234.
Regarding Cathie Wood’s prediction of $2,000 per share, it’s a long shot, but it could happen. With self-driving vehicles and the Optimus robot on the horizon, Tesla could look very different in a few short years. Based on past performance, it’s unwise to underestimate Tesla’s potential.
At the time of publication, Ponsi was long TSLA.
