Tesla: 1 Reason to Love It, 1 Reason to Be Cautious

Key Points

• Tesla is down more than 50% in three months, with sentiment near its lowest point.
• Analysts remain divided, with price targets ranging from $120 to $550.
• RSI at 29 suggests extreme oversold conditions, while MACD hints at a possible reversal.

Few stocks have seen as much volatility as Tesla Inc. NASDAQ: TSLA in recent months. After peaking at an all-time high in December, shares have collapsed more than 50%, dragging the stock back to 2020 price levels.

The rapid decline has been driven by a mix of weak earnings, slowing demand, and increasing concerns about Elon Musk’s leadership following his decision to work closely with President Trump.

While the stock saw a brief recovery bounce last week, momentum has already stalled, and Tesla is on the verge of breaking to fresh lows. Market sentiment remains highly negative, and bearish analysts continue to slash their price targets, suggesting the worst may not be over just yet.

1 Reason to Be Cautious: Analysts Are Slashing Their Price Targets

Tesla’s most recent earnings report at the end of January did little to calm investor fears. The company missed expectations on both revenue and earnings per share, and its outlook for the year ahead looks increasingly weak.

Concerns have only intensified since then. Last week, J.P. Morgan lowered its Tesla estimates and cut its price target to $120, suggesting the stock could fall another 50% from current levels. The firm cited ongoing struggles with deliveries, falling used car prices, and Tesla’s weakening brand strength as key reasons for its bearish stance.

This represents one of the most negative outlooks on Wall Street, and if broader market weakness continues, it could make it even harder for Tesla to regain its footing. With Musk’s unpredictable leadership style adding further uncertainty, some investors may prefer to wait for stronger signs of stability before considering an entry.

1 Reason to Love It: The Upside Potential Is Massive

Despite the overwhelmingly negative sentiment, not everyone on Wall Street is giving up on Tesla. In the past two weeks, several firms, including Royal Bank of Canada, Canaccord Genuity Group, and Wedbush, have reiterated bullish ratings on the stock.

These analysts argue that much of the worst-case scenario is already priced in. Their price targets range from $320 to as high as $550, implying an upside potential of more than 150%. For investors with a high-risk tolerance, this kind of reward-to-risk setup may be difficult to ignore.

Remove Ads

Wedbush, in particular, continues to see Tesla as a leader in the upcoming affordable EV market, with expectations that a sub-$35,000 car could be released before summer. The firm also values Tesla’s push into autonomous driving, energy storage, and AI-powered robotics, all of which should drive long-term growth.

Technical Setup: Is a Reversal Coming?

From a technical perspective, Tesla’s stock is showing all the signs of this relentless selling pressure.

Its relative strength index (RSI) is sitting at 29, indicating that the stock is now in deeply oversold territory.

This makes for a potentially interesting entry point for investors because historically, Tesla has rebounded strongly when its RSI reaches these levels.

Additionally, the MACD is on the verge of a bullish crossover, which tends to signal a shift in momentum.

If the broader market stabilizes, Tesla’s technical setup suggests a short-term bounce is likely, though whether it leads to a full recovery remains uncertain.

Further supporting this case, trading volume has spiked, often a sign of capitulation before a reversal.

Meanwhile, options activity shows increased bullish positioning, hinting that some investors are betting on a rebound.

Tesla’s Bear vs. Bull Case: Where Does the Stock Go Next?

Tesla remains one of the most polarizing stocks in the market. On one hand, the bearish case is strong - earnings have been weak, deliveries are under pressure, and analysts like J.P. Morgan sees another 50% downside ahead.

On the other hand, bullish analysts believe Tesla’s long-term growth potential remains intact, with some price targets implying a massive recovery from current levels.

For investors willing to stomach the volatility, this could be a rare chance to buy Tesla at an extreme discount. However, given the broader market uncertainty and the company’s near-term struggles, caution is warranted.