Tesla’s Next Big Moves: Will Robotaxis and Earnings Ignite a Stock Surge or a Selloff?
Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in TSLA.
Some companies are boring. And then there’s Tesla, Inc. (Ticker: TSLA). Rarely a day goes by when the electric vehicle (EV) maker isn’t in the news. Whether it’s a new model, safety concerns, or the behavior of CEO Elon Musk, Tesla’s drama could be an HBO special.
All the twists and turns make Tesla stock a trader’s dream. Headlines create volatility*, and Musk’s unpredictable nature is often at the center of it. In early September, for example, TSLA fell on a report that the company might share self-driving car revenue with another firm Musk owns.
There’s more drama ahead. For one, Traders are eagerly anticipating the company’s upcoming Robotaxi reveal. Throw in earnings on October 16, and you’ve got a potential recipe for big swings in either direction.
Looking at TSLA’s recent price action, the 50-day moving average* seems to be playing a role. Having plunged below it in the wake of weak second quarter earnings, the stock has battled for just over a month to decisively reclaim this well-watched trend measure. The last attempt, in early September, was derailed, dashing the bulls’ hopes once again.
Below is a daily chart of TSLA, as of September 11, 2024.
Source: StockCharts.com, September 11, 2024.
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
Let’s Hear it From the Tesla Bulls
Why might TSLA be primed to rock and roll from here? Let’s look at what a bull on the stock might say at the moment:
- China sales are strong: Tesla vehicle insurance registrations for the week ending September 8 amounted to 16,200. That was 12% higher than the previous week, and the third-best weekly number for all of 2024, according to Investor’s Business Daily. Given the fierce competition in the China EV market (over 120 manufacturers!), this is big news. And with China accounting for around 22% of Tesla’s global revenue, more sales there can be a tailwind for third quarter earnings.
- The Robotaxi reveal could wow the market: On October 10, Tesla is set to unveil its Robotaxi, a highly anticipated event, to say the least. It’s so high stakes Musk has booked the Warner Bros. Disney studio (MSN) in Burbank, California to showcase the new car. The market potential is huge: Competitor Waymo currently does over 100,000 rides per week between Phoenix, Los Angeles, and San Francisco (Yahoo Finance). If traders are impressed by what they see and hear on October 10, the stock could rise as the market prices in TSLA taking a big share of the Robotaxi market.
- Earnings could surprise to the upside: The stock took a big hit when it reported second quarter earnings that compared unfavorably with the numbers from last year. A bounce-back print for the third quarter could go a long way to allay fears that Tesla’s best is behind it. The company will report on October 16. Estimates are for earnings of $0.46 per share* vs. $0.53 in the same quarter last year.
And Now, Let’s Turn it Over to a Tesla Bear
There’re always two sides to a debate. So, here’s what a Tesla bear might say right now:
- The revenue sharing report is a big deal: On September 8, The Wall Street Journal reported “that Tesla could license AI models from Musk's xAI for FSD and share some of that revenue, perhaps up to half.” That’s not exactly great news for Tesla shareholders, who could see a huge percentage of future profits from FSD go to another Musk company instead. Musk has said the report is untrue (Investors.com), although as we all know, he could change his mind.
- The China sales bump won’t save earnings: Sure, Tesla’s sales in China have been pretty good as of late, but that’s because the company slashed prices to move product in a saturated market. Those lower prices mean that China’s contribution to Tesla’s earnings comes in below expectations.
- TSLA is a high-beta stock, and the market could get volatile: We’re entering the feared September-October trading window which isn’t exactly known for roaring bull markets. Add in growing fears of a recession, the upcoming U.S. election, and a Fed that may not deliver what bulls want, and we could see a big fall in equities. Highly priced names like TSLA could be the biggest losers.
Bull or Bear: Here’s How to Play TSLA
For traders bullish on TSLA, the Direxion Daily TSLA Bull 2X Shares (Ticker: TSLL) offers a way to amplify exposure. This leveraged ETF aims to deliver daily investment results, before fees and expenses, of 200% of the performance of Tesla, Inc.'s common stock. On the other hand, TSLA bears can attempt to take advantage of weakness in the name with the Direxion Daily TSLA Bear 1X Shares (Ticker: TSLS). This inverse ETF targets daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Tesla, Inc.'s common stock.
*Definitions and Index Descriptions
Single Stock Daily Leveraged & Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying individual security over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments.
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at www.direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Funds have derived all disclosures contained in this document regarding Tesla, Inc. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Tesla, Inc. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Tesla, Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Tesla, Inc. could affect the value of a Fund’s investments with respect to Tesla, Inc. and therefore the value of the Funds.
Tesla Investing Risk — The trading price of TSLA has been highly volatile and could continue to be subject to wide fluctuations in response to various factors. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
Tesla, Inc. Risk — The future growth and success of Tesla, Inc. are dependent upon consumers’ demand for electric vehicles, and specifically, its vehicles in an automotive industry that is generally competitive, cyclical and volatile. If the market for electric vehicles in general and Tesla, Inc. vehicles does not develop as Tesla, Inc. expects, develops more slowly than it expects, or if demand for its vehicles decreases in our markets or our vehicles compete with each other, the business, prospects, financial condition and operating results of Tesla, Inc. may be harmed. Tesla, Inc. may fail to meet its publicly announced guidelines or other expectations about its business, which could cause the price of TSLA to decline significantly.
Automotive Companies Risk — The automotive industry can be highly cyclical, and companies in the industry may suffer periodic operating losses. Automotive companies can be significantly affected by labor relations, fluctuating component prices and supplier disruptions.
Direxion Shares Risks – An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning. Risks of the Funds include Effects of Compounding and Market Volatility Risk, Leverage Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Daily Correlation Risk, Tesla, Inc. Investing Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, Trading Halt Risk, Cash Transaction Risk, Tax Risk, and risks specific to the consumer discretionary sector, electric and autonomous vehicles companies, and automotive companies. Additional risks include, for the Direxion Daily TSLA Bear 1X Shares, risks related to Shorting. Please see the summary and full prospectuses for a more complete description of these and other risks of the Funds.
Distributor: ALPS Distributors, Inc.