Tesla (TSLA) expands on detail amid concerns over valuation

Tesla (TSLA) expands on detail amid concerns over valuation

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Tesla, Inc. (TSLA) shares widened their losses during Tuesday’s session, while the market continues to reevaluate the company’s valuation amid rising real interest rates and falling Bitcoin prices (BTCUSD) .

Main advantages

  • Tesla’s shares widened their losses during Tuesday’s session, with the market rethinking stock appreciation amid rising real interest rates and lower Bitcoin prices.
  • Wedbush Securities recently estimated that Tesla made about $ 1 billion in profit from its position in Bitcoin, effectively linking part of its fortune to cryptocurrency.
  • The stock broke from the 50-day moving average during Monday’s session and extended those losses on Tuesday to the support levels of the trend line.

Tesla shares are traded at a future price / earnings ratio of more than 185x compared to just 19x for the automotive industry in general. With real interest rates rising, the market made the transition from growing stocks to value stocks, putting pressure on high valuations. The electric vehicle industry has also been dealing with disruptions due to the global chip shortage.

There is also the Bitcoin angle. After buying $ 1.5 billion in Bitcoin, Tesla accumulated an estimated profit of $ 1 billion earlier this month, effectively linking stock valuation to the cryptocurrency’s performance. Bitcoin prices fell more than 8% during Tuesday’s session, which may have contributed even further to the sale of Tesla shares.

Tip

ONE real interest rate it is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of the funds to the borrower and the real income for the lender or investor. The real interest rate reflects the rate of time preference for current assets over future assets.

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From a technical standpoint, Tesla’s stock broke from its 50-day moving average at $ 770.71 on Monday, before dropping further to key support levels on Tuesday. The relative strength index (RSI) is approaching oversold levels with a reading of 30.50, while the convergence divergence of the moving average (MACD) remains in a sharp downward trend. These indicators suggest that the stock may undergo some consolidation in the short term, but the general trend remains bearish.

Traders should note the consolidation between the trendline support at around $ 650.00 and the 50-day moving average at $ 770.71 in the coming sessions. If the stock breaks, traders may see a move towards Fibonacci support at $ 592.02 or $ 508.28. If the stock breaks, investors should be on the lookout for a new high test of around $ 900.00.

The Bottom Line

Tesla’s shares widened its losses during Tuesday’s session, with the market reassessing valuations amid rising real interest rates. In addition, the stock could be affected by the fall in Bitcoin prices after its $ 1.5 billion investment, as well as a global chip shortage.

The author does not hold any position in the shares mentioned, except through passively managed index funds.

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