Tesla (TSLA) -) stock is the epitome of a battleground company. Bulls and bears have been duking it out for years. However, even CEO Elon Musk's most ardent fans weren't likely expecting Tesla's shares to gain over 100% this year or rally nearly 70% since early May.
Real Money analyst Bruce Kamich is one of the few who got Tesla's recent rally right. On May 10, he wrote that he saw "potential fuel for a rally in the days ahead," setting a $191 price target. He doubled down on his bullishness as shares rallied, increasing his target to $245 on May 30 and $300 on June 21.
Recently, Kamich updated his analysis, including a new Tesla price target that will likely raise eyebrows.
Tesla's benefits from a surge in EV sales
Consumers are increasingly choosing electric rather than gas-powered vehicles, and that's been great news for Tesla, the largest U.S. EV automaker.
Through the first six months, Tesla delivered 920,508 EVs, exceeding forecasts and putting it on pace to achieve its goal of producing 2 million vehicles this year. The company, which boasted a 62% EV market share in 2022, is perfectly positioned to sell more units as EVs grow to represent an increasingly more significant proportion of total vehicles sold.
In the U.S., EV sales grew 48% year-over-year in the second quarter, according to Cox, representing 7% of total vehicle sales. S&P Global Mobility predicts EVs will represent 40% of total passenger car sales by 2030. EV adoption is even better in Europe, where one in every four cars sold in Q2 was battery-powered.
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Rising demand has been a boon to Tesla's financials. In Q2, Tesla's revenue grew 47% year-over-year to $24.9 billion, resulting in earnings of 91 cents per share, up 20% from last year.
Tesla's price charts suggest a new target
Bruce Kamich has analyzed price charts for professional investors for over 50 years. His bullish takeaway on Tesla earlier this year was based on his technical analysis of Tesla's price and volume action.
Kamich on Aug. 30 reviewed Tesla's daily and weekly charts for insight into whether the rally in Tesla's stock could be running out of steam. He also used point-and-figure charts to update his price targets. Unfortunately for Tesla bulls, he came away unimpressed.
Kamich writes:
"In the weekly Japanese candlestick chart of TSLA, I see a mixed picture. Prices are trading above the rising 40-week moving average line, but the trading volume has been declining in recent months, and that is not a positive in view. The weekly OBV line has climbed higher this calendar year but shows weakness from July.
The MACD oscillator is crossing to the downside for a take profit sell signal. The candles do not show me a bottom reversal pattern and that is not comforting."
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.
Typically, Kamich would want to see up volume confirm rising prices and momentum add conviction that more buying is likely. Unfortunately, that's no longer the case.
His updated price targets of $213 and $157 on the daily and weekly P&F charts suggest meaningfully more risk than three months ago, given shares have already retreated from Kamich's $300 target to $256 on August 30.
Of course, point-and-figure charts don't say when a stock will get to a target, but the downbeat price targets and uninspiring price charts suggest investors approach the stock cautiously.
"Traders should take a neutral stance on TSLA for now, but the risks for further weakness are growing. Traders who are long should either nail down profits and/or tighten stops," concludes Kamich.
