Key factors impacting Tesla stock decline ahead of earnings

In 2024, Tesla NASDAQ:TSLA is navigating a year full of turbulence, a stark contrast to its historic performance as a leader in the electric vehicle and technology sectors. With shares plummeting, Tesla now holds the unfortunate title of worst-performing S&P 500 stock, down nearly 40% for the year. This week alone, the company saw a decline of close to 10% due to more negative headlines.

However, the broader market has seen a steady rise, with gains of nearly 6% year to date. Likewise, the tech sector has shown resilience, boasting an increase of nearly 4.5% over the same period.

So, let’s delve into the recent catalysts behind Tesla’s downward spiral and examine insights from analysts and insiders. By understanding these factors, we can better understand the stock’s current position and potential future trends.

Recent catalysts and challenges pushing the stock lower

Ahead of Tesla’s upcoming earnings report on April 23 after the market close, the company faced several challenges. Recently, CEO Elon Musk announced plans to lay off more than 10% of Tesla’s global workforce to streamline operations and increase productivity. This decision followed a note in which Musk highlighted the need for cost reductions and efficiency improvements. The news sent Tesla shares down more than 5% on Monday.

Additionally, earlier this month, Tesla reported its first annual decline in vehicle deliveries since 2020, with first-quarter deliveries falling 8.5% year-over-year to 386,810 vehicles. Despite discounts and incentives offered to customers, production fell 1.7% from the previous year and 12.5% ​​on a sequential basis.

Additionally, on April 17, Tesla proposed a controversial $56 billion pay package for CEO Elon Musk, seeking shareholder approval. This plan, previously rejected by a Delaware Chancery Court judge in January, prompted Tesla to consider moving its headquarters from Delaware to Texas. These developments highlight Tesla’s strategic challenges and shifts as it navigates a critical phase in its growth trajectory.

Sentiment for TSLA is negative

Despite enjoying a huge fan base and consistently being one of the most searched for stocks, Tesla’s current sentiment is predominantly bearish. Recent data reveals the move by analysts from the Hold rating to the Reduce rating, a downgrade compared to the previous rating. This rating places Tesla below the consensus rating for other auto companies, which remains at Hold, and the consensus rating for the S&P 500.

In recent weeks, there has been a notable trend for analysts to revise their price targets for Tesla. In particular, JPMorgan analysts cut its target from 130 to 115 dollars, Wells Fargo reduced its from 125 to 120 dollars and on April 10, analysts at Jefferies Financial Group changed their target from 185 to 165 dollars. Despite the recent downgrades and prevailing bearish sentiment, it is interesting to note that the consensus price target for Tesla is still significantly above the stock’s current levels. With a consensus price target of $197.15, analysts see an impressive 27% upside potential.

While internal transactional activity has been quiet for Tesla over the past twelve months, it’s worth noting that there have been five share sales and no purchases. There have been five domestic sales of $71 million in the past twelve months, with no domestic purchases occurring in the same period.

A technical overview

Even from the point of view of technical analysis it is not a pretty picture. The stock is trading below its major simple moving averages (SMA), including its declining 200-day SMA. This action consolidates the severity of the stock’s downtrend. In the short term, as the stock approaches a significant catalyst, upcoming earnings, it trades near a potential support level near $150, which has been a turning point in the first half of 2023 for the stock.

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