Tesla After The Cybertruck Reveal - Where To From here?

12/12/19 04:26:44 PM

by Matt Blackman

Tesla stock took a hit after the Cybertruck reveal and window demo fail but there are some powerful reasons why this reaction might just be temporary.

Security: TSLA
Position: N/A

Anyone who watched the Tesla Cybertruck reveal November 21 undoubtedly has the 'steel ball hitting the window' moment permanently etched into their memory. The unexpected fail as the window shattered... twice... even prompted CEO Musk to utter an expletive on stage that certainly wasn't planned. That and the truck's rather stark futuristic wedge shape triggered a stock drop of more than 6% on November 22.

But was it warranted?

Figure 1. Daily chart showing Tesla (TSLA) leading up to the Cybertruck reveal and after versus the Auto Manufacturers Major index (dark blue line).

Graphic provided by: Freestockcharts.com.

Despite the loud and mostly negative initial reaction, there are some good reasons why the truck could actually be a big positive for the company. At a list price starting at $40,000 for the entry level rear-wheel drive vehicle that includes a super crew cab, 250 mile range, 6.5 foot bed and respectable payload and towing performance, it is a bargain compared to the average U.S. pickup selling price of $44,000.

The Cybertruck includes a number of features that are optional upgrades in other trucks. It is also notable that the Cybertruck is only the second electric pickup to hit the market so far after the Rivian R1T launched in May, which at $69,000 is nearly $30,000 more than the Cybertruck.

Another positive is pre-orders. By November 24, Tesla had logged more than 200,000 pre-orders putting it on track with the hugely successful Tesla Model 3 (starting price $35,000), which logged a similar number of pre-orders within two days of launch in 2016 (see Figure 2).

Next, let's look at the unveiling of the Tesla Model Y on March 14. TSLA suffered a 5% drop the next day and had fallen more than 30% by May 31, but then bounced back above $300 by late October.

Figure 2. Weekly chart of Tesla showing stock performance since 2013 including after the last two model releases.

Graphic provided by: Freestockcharts.com.

Tesla stock price has a history of being highly volatile and it looks like that trait will continue given the roller coaster earnings performance and news-driven nature of the stock.

From a technical point of view, I see no obvious buying or selling patterns on the chart, which is not all that surprising given that 53% of the shares are held by institutions that tend to hold longer term.

In summary, prior model releases have tended to have a short-term impact on stock price. I will be keeping an eye on the number of deposits the company logs on this and other models. It goes without saying that it's important to have a trading plan with written buy and sell trigger points on any stock position to protect principal in case of an unexpected drop.

Suggested Reading:

Tesla Buy Signal

Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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Tesla After The Cybertruck Reveal - Where To From here?

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