Tesla’s share price extended its run to six-month high. Can the rally continue?

Tesla’s share price continues its run to six-month high

With better-than-expected second-quarter (Q2) vehicle deliveries as the trigger, Tesla’s share price has surged close to 6.5% overnight, following a 10% run-up the day before.

The 443,956 vehicle deliveries in Q2 beat market expectations of 439,000. It marked a 4.8% decline from a year earlier but rose 14.8% from the first quarter. With its share price weighed by extreme bearish sentiments previously, stronger vehicle deliveries number offered much-needed relief for concerns around sluggish sales, with expectations that this could mark a turnaround.

Share price performance trailed other Magnificent Seven stocks

Over the past one year, Tesla has been the clear laggard among the Magnificent Seven, which may suggest room for catch-up with its big tech peers as sentiments improved. Despite its recent share price surge, Tesla is still down 12% on a one-year basis, which far lagged behind the double-digit gains across the other six big tech stocks. On a year-to-date basis, its share price is still down 0.84%.

Tesla’s earnings recovery set to continue?

Tesla will post its financial results for 2Q 2024 after market close on Tuesday, July 23, 2024.

Current expectations are for Tesla’s 2Q 2024 revenue to decline 2.9% from a year ago. This may mark a lesser contraction from the -8.7% in 1Q 2024. Revenue is expected to revert to positive growth territory from 3Q 2024 onwards, suggesting that the worst could be over. Of course, much will revolve around the upcoming guidance from the Tesla’s results to validate the recovery story.

Earnings per share (EPS) for 2Q 2024 is expected to decline 35% year-on-year to $0.508. That said, it will also mark an improvement from the 53% year-on-year contraction in 1Q 2024.

Technical analysis

On the weekly chart, a bullish development for Tesla’s share price is a break of an upper trendline resistance of a triangle formation in place since November 2021. Its weekly relative strength index (RSI) has also headed above the key 50 level for the first time this year, which suggests buyers taking on greater control.

Further upside may seem to place the US$295 level on watch, with the key horizontal resistance weighing on share price on at least three previous occasions since 2021. On the downside, the upper triangle trendline will serve as support to defend, leaving the US$210 level on watch in any retracement.