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Time to Offload Tesla? Inverse ETFs to Earn Profits
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Tesla (TSLA - Free Report) has proven to be a super stock this year, having gained 115% (as of Jun 22, 2023). This leads to the question of whether it is time to sell Tesla?
Analysts Warning
After Barclays’ analyst Dan Levy, Morgan Stanley analyst Adam Jonas – one of the Tesla bulls –downgraded Tesla this week. Jonas cut the rating on Tesla to Equal Weight from Overweight but raised his price target to $250 from $200, as quoted on Yahoo Finance. Barclays also suggested that it's time 'to move to the sidelines'.
Both analysts believe that Tesla is a great auto company and but AI-hopes built on it are probably too far-fetched. The company’s initiatives like FSD (full self-driving), its Dojo supercomputer, and the Optimus robot put it in the arena of the latest AI rally. But analyst Levy believes AI is a “long-dated” potential for Tesla and not a near-term prospect based on which valuation can be beefed up.
Overbought and Overpriced
The stock is by far one of the most overbought stocks on Wall Street, per a CNBC article. The stock has a Relative Strength Index (14) of 74.56X. Notably, Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. Traditionally, the RSI is considered overbought when above 70.
Tesla is overvalued by all standards. Price/Earnings (TTM) of Tesla is 63.54X versus 10.46X held by the industry. Price/Book of the most recent quarter is 15.86X versus the industry’s P/E of 1.04X. Price/Cash Flow for the most recent fiscal year is 47.43X versus the industry P/CF of 7.83X.
The Zacks Value Score of Tesla is downbeat at “D” while Momentum Score is “C.”
Analysts Agreement - Estimate Revisions
Over the last 60 and 30 days, earnings estimates for the coming quarter have been slashed by one out of 10 analysts. There have been no upward estimate revisions in the past seven, 30 days and 60 days. Earnings estimates for the full-year 2023 has been slashed by three out of 11 analysts over the 60 days period and one cut the same in the past one-month frame.
Magnitude – Zacks Consensus Estimate Trend
The current Zacks Consensus Estimate for earnings for the June quarter is $0.82 per share. The Most Accurate Estimate is $0.70 per share, resulting in an Earnings ESP of -14.84%. A month ago, the estimate was $0.83 per share, while 60 days ago, the estimate was $0.84 per share.
Against this backdrop, we can say that Tesla’s rally may hit a bump. There is a high probability of the stock undergoing a temporary decline in the upcoming trading days, providing an opportunity for bullish traders to consider entering the market.
Traders thinking of making a short-term profit out of this situation may bet on inverse Tesla ETFs.
The AXS TSLA Bear Daily ETF seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the common shares of Tesla, Inc. The expense ratio of the fund is 1.37%.
The Direxion Daily TSLA Bear 1X Shares seek daily investment results, before fees and expenses, of 100% of the inverse of the performance of the common shares of Tesla, Inc. The expense ratio of the fund is 1.07%.
GraniteShares 1x Short TSLA Daily ETF
The underlying GraniteShares 1x Short TSLA Daily ETF seeks daily investment results, before fees and expenses, of -1 times the daily percentage change of the common stock of Tesla Inc. The expense ratio of TSLI is 1.15%.
Bottom Line
For ETF investors who are bearish on Tesla for the near term, either of the above products could make an interesting choice. Clearly, this could be intriguing for those with the belief that the “trend is the friend” in this specific corner of the investing world.
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Time to Offload Tesla? Inverse ETFs to Earn Profits
Tesla (TSLA - Free Report) has proven to be a super stock this year, having gained 115% (as of Jun 22, 2023). This leads to the question of whether it is time to sell Tesla?
Analysts Warning
After Barclays’ analyst Dan Levy, Morgan Stanley analyst Adam Jonas – one of the Tesla bulls –downgraded Tesla this week. Jonas cut the rating on Tesla to Equal Weight from Overweight but raised his price target to $250 from $200, as quoted on Yahoo Finance. Barclays also suggested that it's time 'to move to the sidelines'.
Both analysts believe that Tesla is a great auto company and but AI-hopes built on it are probably too far-fetched. The company’s initiatives like FSD (full self-driving), its Dojo supercomputer, and the Optimus robot put it in the arena of the latest AI rally. But analyst Levy believes AI is a “long-dated” potential for Tesla and not a near-term prospect based on which valuation can be beefed up.
Overbought and Overpriced
The stock is by far one of the most overbought stocks on Wall Street, per a CNBC article. The stock has a Relative Strength Index (14) of 74.56X. Notably, Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. Traditionally, the RSI is considered overbought when above 70.
Tesla is overvalued by all standards. Price/Earnings (TTM) of Tesla is 63.54X versus 10.46X held by the industry. Price/Book of the most recent quarter is 15.86X versus the industry’s P/E of 1.04X. Price/Cash Flow for the most recent fiscal year is 47.43X versus the industry P/CF of 7.83X.
The Zacks Value Score of Tesla is downbeat at “D” while Momentum Score is “C.”
Analysts Agreement - Estimate Revisions
Over the last 60 and 30 days, earnings estimates for the coming quarter have been slashed by one out of 10 analysts. There have been no upward estimate revisions in the past seven, 30 days and 60 days. Earnings estimates for the full-year 2023 has been slashed by three out of 11 analysts over the 60 days period and one cut the same in the past one-month frame.
Magnitude – Zacks Consensus Estimate Trend
The current Zacks Consensus Estimate for earnings for the June quarter is $0.82 per share. The Most Accurate Estimate is $0.70 per share, resulting in an Earnings ESP of -14.84%. A month ago, the estimate was $0.83 per share, while 60 days ago, the estimate was $0.84 per share.
Against this backdrop, we can say that Tesla’s rally may hit a bump. There is a high probability of the stock undergoing a temporary decline in the upcoming trading days, providing an opportunity for bullish traders to consider entering the market.
Traders thinking of making a short-term profit out of this situation may bet on inverse Tesla ETFs.
AXS TSLA Bear Daily ETF (TSLQ - Free Report)
The AXS TSLA Bear Daily ETF seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the common shares of Tesla, Inc. The expense ratio of the fund is 1.37%.
Direxion Daily TSLA Bear 1X Shares (TSLS - Free Report)
The Direxion Daily TSLA Bear 1X Shares seek daily investment results, before fees and expenses, of 100% of the inverse of the performance of the common shares of Tesla, Inc. The expense ratio of the fund is 1.07%.
GraniteShares 1x Short TSLA Daily ETF
The underlying GraniteShares 1x Short TSLA Daily ETF seeks daily investment results, before fees and expenses, of -1 times the daily percentage change of the common stock of Tesla Inc. The expense ratio of TSLI is 1.15%.
Bottom Line
For ETF investors who are bearish on Tesla for the near term, either of the above products could make an interesting choice. Clearly, this could be intriguing for those with the belief that the “trend is the friend” in this specific corner of the investing world.