Polestar Stock Forecast: PSNY needs to break above $4 to continue rally

• Polestar cut its per vehicle emissions by 8% YoY.
• PSNY stock is in a bullish setup.
• NASDAQ futures are flat in Wednesday's premarket.
• Polestar stock has lost 31% YTD.

Polestar (PSNY) has a chance of digging itself out of its current predicament based on the current chart setup. Both the Moving Average Convergence Divergence (MACD) indicator and the Relative Strength Index (RSI) are siding with bulls at the moment, so it is quite possible that shareholders will finally see some pushback against PSNY's -31% performance year to date.

Polestar stock news: New emissions progress

On Monday Polestar, a joint venture owned by Sweden's Volvo and China's Geely Automobile (itself the parent company of Volvo), announced that it was able to reduce its CO2-equivalent emissions by 8% per vehicle in 2022 compared with the prior year. The announcement is included in Polestar's Annual Sustainability Report.

Polestar is an electric vehicle company but remains focused on reducing emissions from its supply chains and production operations. Management said that a number of strategies were converging to reduce unit emissions levels, but especially "reduced average transports, high sales in markets with more renewable energy on grids" and running its Polestar 2 factory on 100% renewable energy. The automaker has cut its per car emissions by 13% since 2020.

Polestar delivered 51,500 vehicles to consumers in 2022, an 80% increase over 2021, but major news at the automaker has been sparse during the first quarter as it focuses on bringing the Polestar 3 and 4 to market. Polestar management said during its Q4 earnings call in early March that it is expecting to grow deliveries to 80,000 this year – a plan made more likely via entering eight new markets: the United Arab Emirates, Kuwait, Hong Kong, Ireland, Israel, Italy, Spain and Portugal.

“We left 2022 having exceeded our 50,000 delivery target, grown revenue over 80 percent and with strengthened liquidity," said Thomas Ingenlath, Polestar CEO, in his Q4 statement. "We are focused on business execution and have had a busy start to this year with a major update to Polestar 2, excellent reception for Polestar 3, and welcomed additional sustainability partners for our ambitious Polestar 0 project. Our business will continue to gain momentum through the year as we start producing Polestar 3 - and with Polestar 4 in the starting blocks.”

Despite reducing operating losses in the fourth quarter by 39% to $204.7 million, Polestar did say that it may need to sell more equity (i.e. dilution) or raise more debt to sustain its production ramp sometime in 2023. The company borrowed $724 million in short-term debt to fund operations last year.

Polestar stock forecast

As you can see at the bottom of the daily chart below, Polestar stock has witnessed a bullish crossover on the MACD. This typically foreshadows a rally of some sort. Additionally, the RSI (not shown) spent the last half of March in oversold territory. After emerging back into neutral in April, this augurs well for the month ahead. Of course the macro environment may have a different feeling, but PSNY has not been a staunch follower of broad market dynamics thus far. 

At the moment PSNY is stuck between the 9-day moving average at $3.53 and the 21-day at $3.86. A break above the 21-day moving average would allow bulls to make a push for the $5.40 level not seen since early March. First, bulls need to clear the $4 threshold though. This psychological level is far enough above the 21-day moving average that a clear close above here would signal that this rally has legs. In the meantime, the $3.25 support level from late March is close enough for comfort.

PSNY daily chart