Tesla Motors (TSLA) Stock: Major Topping Process is Underway

Tesla stock

Shares of electric car maker Tesla Motors (NASDAQ:TSLA) tumbled more than 11 points to $201 in early market trading Thursday, putting them on track to extend their 2016 slump of more than 12 percent.

After trading sideways for the better part of the past month, Tesla’s stock recently broke down of its $220 base. As the name continues moving into the $205/$200 bearish zone, the downward trend toward breaking support at the all important $200 level seems to suggest a strong bull to bear reversal. Furthermore, the move keeps getting executed with above average volume, suggesting there’s conviction behind it.

TSLA was last trading at $204, down 3.7% on the day. The weak start has quickly extended bringing first level support into play at $203.19. At that price next support is at $201.21. A break below this level and a failed attempt to distance itself from the $200 zone would confirm a major topping process is underway.

It’s worth noting that today’s stock slide was the result of the company’s announcement of a second round of financing to fund Model 3 production, equipment for its Gigafactory, as well as its buyout of cash-burning solar-energy provider SolarCity Corp (NASDAQ:SCTY).

The news broke via a registration statement filed with the U.S. Securities and Exchange Commission, which said “[w]hile Tesla expects that its current sources of liquidity, including cash and cash equivalents, together with its current projections of cash flow from operating and retail financing activities, will provide it with adequate liquidity based on its current plans through at least the end of the current fiscal year, Tesla is currently planning to raise additional funds by the end of this year, including through potential equity or debt offerings.”

Earlier this month, Tesla said it had $3.25 billion in cash and equivalents. However, after spending $678 million on a revolving credit line in July, plans in redeeming $422 million in convertible notes-an amount that comes on top of Tesla’s $224 million in outstanding notes, and projections at spending another $1.75 billion building out the Gigafactory in the second half of the year, leaves the electric car maker’s liquidity with well under a billion dollars while it takes on the massive financial sinkhole known as SolarCity Corp.

Tesla has never made an annual profit. The Palo Alto, Calif.-based subsidy-reliant electric car company, whose bottom line keeps deteriorating, managed to lose a record (GAAP) $20,357 per car sold in its latest quarter. Tesla has recorded operating losses in 14 straight quarters and negative cash flow since early 2014. The issue has a trailing-12 price-to-sales ratio of 6.88. EPS for the same period prints at a loss of $8.45.

In the past 52 weeks, shares of Tesla Motors have traded between a low of $141.05 and a high of $271.57, with the 50-day MA and 200-day MA located at $224.62 and $220.69 levels, respectively. Additionally, Tesla’s stock trades at a P/E ratio of (7.52) and have a Relative Strength Index (RSI) and MACD indicator of 24.54 and -11.38, respectively.

TSLA’s next short term area of interest is at $209.57/$208.36 followed by the $207.14, $205.16 zone, respectively. June lows are near $187/$189.

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