April 20, 2023
After the close of the stock market on Wednesday, Tesla Motors (TSLA) reported disappointing Sales and Earnings numbers for the most recent quarter, and the stock looks to open, at a new 6 month low today.
On the back of this disappointing earning reports, many of the major brokerage and investment firms are cutting their year long price targets for TSLA from the high 200’s to the low 200’s. So, is this a time to buy? Maybe, for a technical bounce but there continue to be growing technical warnings of more problems ahead.
Adding to the problems for TSLA is the statement by Elon Musk, that he was beginning another round of price cuts, further reducing the company’s profit margins.
The price cuts for TSLA and other Electric Vehicles (EV’s) may help clear building inventories of unsold cars at dealers sites> But there are growing signs that auto sales are falling because buyers are facing higher financing costs, and more concerns about a slowing economy and possible recession in the second half of the year.
The announcement of more layoffs of technical and professional staffs at Facebook-META cannot build confidence in the strength of the overall economy.
As highly paid professionals get laid off, will that cause growing problems for individuals to stay current on their existing car loans and mortgage payments? Certainly make many reluctant to take on new debt.
We are also seeing increasing defaults for commercial real estate loans, as empty office buildings are not producing projected cash flows needed to service existing loans. Big private real estate funds, are limiting withdrawals, as investors seeing these signs of a slowing economy try to head to the exits.
Like the lyrics in Hotel California suggest: You can always invest in these private real estate funds, but you cannot leave when you want.
For these cautionary signs, I believe that we could be seeing the beginning of the end of this recent stock market rally.
I could be wrong, but I remain cautious on the auto sector and the banking sector.