- Tesla stock closes up nearly 2% on Monday at $1,004.29.
- TSLA CEO Elon Musk is still engaged in Twitter takeover proposal.
- Tesla's Giga Shanghai is due to begin reopening this week.
Tesla (TSLA) stock moved higher on Monday in relatively subdued trading due to the Easter break. Tesla closed up 2% on about 17 million shares traded when the average daily volume would usually be north of 25 million. However, the stock still performed well, outpacing gains made by the major indices on Monday.
Tesla Stock News
There is a lot to digest with Tesla as ever, especially when you have a CEO as colorful as Elon Musk. We have the ongoing Twitter (TWTR) takeover saga. Just for a primer, Elon Musk took a 9% stake in Twitter and then offered to buy the remaining shares for $54.20 per share. The Twitter board met to consider this and decided on rejection and to fight the bid using what is known as a poison pill mechanism. This is basically where Twitter can issue new stock to hinder any takeover bid.
In Twitter's case, the proposal kicks in if Elon (or anyone else) acquires over 15% of Twitter. Twitter (TWTR) could then issue new stock, akin to money printing, meaning the 15% stake becomes diluted and thus making it much harder for Elon Musk to follow through. This was even before Musk contemplated how to pay for the entire offer in the first place. While he is the world's richest man, most of that wealth is built on his Tesla holding. Stumping up for Twitter may necessitate selling some of that stake or obtaining financing for the deal. Given his and Tesla's status, investment banks would likely be lining up to advance funding, but Tesla shares would likely be pledged to secure any funding.
More specifically and immediately, Tesla releases Q1 earnings after the close on Wednesday. This quarter may escape the effects of recent lockdowns in Shanghai, which have forced Giga Shanghai to close and suspend production due to covid outbreaks. The latest information appears to be that Giga Shanghai will reopen on a phased basis this week. TF International Securities analyst Ming-Chi Kuo, however, thinks the factory will not reach pre-covid capacity until mid-May. In any event, Tesla is expected to post earnings per share of $2.27 and revenue of $17.9 billion.
Tesla Stock Forecast
The series of lower highs remain in place, so we keep our bearish rating on the stock. Currently, Tesla, like much of the stock market, is in a holding phase with a breakout expected. Earnings will be the catalyst. We note that Tesla announced record deliveries of 310,000 earlier this month, which was slightly behind analysts' forecasts. Given the problems since with production lags in Shanghai, we do not expect an outperformance. In our view the risk reward is to the downside. $945 is the first key support and then $900, which is where the 200-day moving average sits. Breaking $1,152 ends the bearish thesis.
Both the Relative Strength Index (RSI) and the Money Flow Index (MFI) gave overbought signals on the last high in the series at $1,152.
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TSLA stock chart, daily
The author is short Tesla.
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