Tesla (TSLA) -) is one of the most fiercely debated stocks on Wall Street. Bulls cheer Elon Musk’s ability to overcome the odds, while bears argue the mercurial CEO’s predictions often fall short.
While Tesla bulls have been big winners this year, given shares are up 81% year-to-date, bears recently wrestled back control, sending shares lower since summer.
Real Money analyst Bruce Kamich is one of the few to predict Tesla’s rally and sell-off accurately. He correctly said in June that Tesla would hit $300, and in August, he advised shareholders to “nail down profits.”
What does Kamich think now? He recently updated his analysis, setting a new price target for the electric vehicle giant.
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Tesla profits from surging EV sales
Car buyers are increasingly swapping gas-guzzling cars powered by internal combustion engines (ICE) for battery-powered EVs. According to Kelley Blue Book, U.S. EV sales surged nearly 50% from last year to 313,000 in the third quarter, accounting for nearly 8% of all vehicles sold.
Related: Elon Musk's Tesla just got into a weird new business
Electric vehicles' rapid adoption stems from the availability of increasingly more models, tax credits, and lower prices. Although many companies now sell EVs, Tesla has been the prime beneficiary of EV sales growth, accounting for nearly half of all EVs sold last quarter.
As a result, Tesla’s total revenue clocked in at $23.4 billion, and earnings totaled 66 cents per share in Q3. Wall Street analysts expect full-year earnings of $3.18 per share this year. Next year, they think earnings will grow 37% to $4.36 per share.
The potential for additional earnings growth is likely, given S&P Global Mobility forecasts EVs will represent 40% of passenger car sales by 2030.
Tesla's price charts result in a new target
Bruce Kamich has analyzed price charts for professional investors for 50 years. His bearish advice on Tesla in August was based on his technical analysis of Tesla's price and volume activity.
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Kamich reviewed Tesla's daily and weekly charts on Oct. 18 and updated his Tesla price targets based on point-and-figure charts. His outlook will likely disappoint many investors.
Kamich writes: "Trading volume has been shrinking, and the On-Balance-Volume (OBV) line has declined as sellers of TSLA appear to be more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is hugging the zero line telling me there is little or no trend strength.”
The on-balance volume (OBV) is essentially a running total of up minus down volume. MACD is a momentum measure calculated by subtracting the 26-day Exponential Moving Average (EMA) from the 12-day EMA. A bullish or bearish signal triggers when that result crosses over or below zero.
Kamich would like to see heavier volume on up than down days and bullish momentum to have conviction shares are likely heading higher. Unfortunately, the charts show neither is true.
Tesla’s point-and-figure charts confirm downside risk remains. Kamich calculated a Tesla price target of $193, about 14% below its price on October 19.
