Tesla stock may be in a buyable bottom

So far, 2024 has been a year to forget for electric vehicle and technology giant Tesla NASDAQ:TSLA as stocks have plummeted. Year to date, shares of the magnificent seven members have fallen nearly 20% and nearly 15% from the previous three months.

This is a rare negative performance for the company as it has historically outperformed the overall market. However, that wasn’t the case, as the SPDR S&P 500 ETF Trust said NYSE: SPY, a benchmark for the market, has grown by more than 5% since the beginning of the year. The technology sector, Invesco QQQ ETF NASDAQ: QQQwhich also increased by more than 5% over the same period.

However, could the tide turn for Tesla stock after the stock had a green week last week, closing up more than 3%? After starting the week flat and holding above previous support, the stock rallied towards the end of the week, posting a modest gain. Tesla’s recent action, along with the overall market trading near all-time highs, begs the question: has Tesla hit bottom and is now the time to buy?

Let’s take a closer look.

Tesla’s recent earnings and current valuation

Tesla released its quarterly earnings data on January 24, 2024, reporting $0.71 per share for the quarter, $0.04 lower than analysts’ consensus estimates of $0.75. Despite revenue of $25.17 billion during the quarter, slightly lower than analysts’ forecasts of $25.64 billion, the company’s quarterly revenue saw an increase of 3.5% compared to the same quarter last year .

With a current price-to-earnings (P/E) ratio of 46 and earnings per share of $4.31 over the past year, Tesla expects earnings growth of 36.09% over the next year, from 2.66 to 3 $.62 per share. While Tesla has not confirmed its next earnings release date, it is estimated to be Wednesday, April 17, 2024 based on prior year’s reports.

From a fundamental standpoint, one could argue that Tesla is overvalued, with a P/E of 46 and a Forward P/E of 47. However, from a technical standpoint, the stock’s Relative Strength Index (RSI) of 49.15 puts it close to oversold territory, making it a prime candidate for an edge.

Sentiment remains mixed for Tesla

Despite having a cult following and being one of the most sought after stocks, sentiment around Tesla remains bearish to mixed.

Tesla is among the most downgraded and lowest-rated stocks, according to a list of publicly traded companies that analysts have downgraded most frequently over the past ninety days.

Based on thirty-four analyst ratings, Tesla has a Hold consensus rating. This rating remained stable compared to the previous year, during which analysts who had classified Tesla as “Buy” fell from twenty to the current nine. The analyst consensus price target on the stock is $219.89, which calls for an upside of nearly 10%. While the two most recent analyst actions on the stock have been less than favorable, both price targets are higher than the stock’s previous close.

On February 5, Piper Sandler lowered his target for Tesla from $295 to $225. Daiwa Capital Markets downgraded the stock the next day and cut its target from $245 to $195.

Support has been confirmed

From a technical analysis perspective, support has been confirmed in the short term, giving traders and investors a level to trade against. After entering a previous support zone near $180 two weeks ago, the stock has found support and buyers and recently broke above its previous rotation high from earlier in the year. As a result, if the stock continues to base above previous support and confirms higher lows, a move towards the 200-day simple moving average could be the next target for an upside, currently near $233. With a Beta of 2.43, if a trend develops in Tesla, you can expect short-term volatility and significant outperformance versus the market.

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