Tesla Stock Sits at Make-or-Break Price as China, European Sales Rise Ahead of Earnings

Tesla stock strengthened this week and again approached a resistance area that has repeatedly limited gains since September. TSLA closed at $382.70 on Oct. 9 after reaching an intraday high of $388.56.

The move comes less than two weeks before Tesla reports third-quarter financial results. Investors are balancing stronger-than-expected global deliveries and Shanghai exports against high spending, weaker China domestic sales and elevated valuation.

Tesla Stock Has Hit a Crucial Resistance

The daily chart shows that TSLA stock has made a slow recovery in the past few months. It soared from a low of $297.3 in July to a high of $386. Its upper side is notable because it has failed to move above it several times since September.

The risk, however, is that the stock has formed a triple-top pattern whose neckline is at $346, its lowest level on September 30th. This pattern normally leads to a bearish reversal over time.

On the positive side, the stock has moved above the 50-day and 200-day moving averages and the spread between the two is narrowing. If this happens, it will form a golden cross pattern, a sign that bulls are gaining momentum.

Therefore, a move above the triple-top level of $386 will point to more gains, potentially to the psychological level of $400. A surge above that level will lead to more gains towards the Ultimate Resistance level of the Murrey Math Lines tool at $437.

Tesla Sales are Recovering in China and Europe

There are signs that Tesla’s sales are doing well as consumers turn to electric vehicles as gasoline prices surge. According to Reuters, China-made electric vehicle sales rose by 5% in September after rising by 3.6% a month earlier.

Data shows that these sales rose to 95,366 from 90,812 the same period last year. These sales include the vehicles the company delivered to Europe, Asia Pacific, and Canada. It was the 11th consecutive month of annual gains.

The same trend is happening in other countries, including in Europe, where sales have jumped amid rising gasoline prices. The most recent data showed that Tesla’s vehicle deliveries rose to 486,532 in the third quarter, after making 464,391. These numbers were lower than in the same period last year because consumers rushed to buy before the federal tax credits expired.

These sales will likely continue growing now that it has provided a timeline for its Roadster and its semi trucks.

Therefore, analysts expect the upcoming results to show that its revenues dropped slightly in the second quarter. In this case, the estimate is that its revenue dropped by 0.25% to $28 billion. After that, analysts see fourth-quarter revenue coming in at $28.98 billion, up 16% from a year earlier.

Tesla’s main challenge is that it continues to spend billions of dollars in its AI business, which is making its free cash flow negative. Together with SpaceX, it is building Terafab, one of the world’s most ambitious semiconductor facilities.

A key challenge for Tesla is that it is highly overvalued, with a forward price-to-earnings ratio of 215, much higher than that of other companies, including popular names like Nvidia and Micron. Micron, whose revenue surged by over 300% in its fourth quarter, trades with a multiple of 8. Nvidia, the biggest beneficiary of the AI boom, trades at a multiple of 24.

These views explain why some analysts are paring back their expectations of the company. BNP Paribas lowered its target from $280 to $268, while JPMorgan slashed the target from $445 to $415.

This article is for informational purposes only and does not constitute financial or investment advice. Analyst targets, earnings estimates and technical levels may change as market conditions evolve.