TSLA Stock: Competition is Outperforming
Tesla motors makes electric cars that are known for excessive acceleration and reliability. In a short span of time, this company was able to break into a highly competitive market and approach it from a revolutionary standpoint. The product they produced broke records on the track, and in the consumer report rating system. Tesla motors scored the highest-known rating, and that event caused them to change the scoring of their benchmark. It is unfortunate that the hype around Tesla Motors Inc (NASDAQ:TSLA) stock has not been able to push shares higher, as the shares have underperformed the indices in recent years.
Tesla stock is not the only game in the electric-powered vehicle space. Ferrari NV (NYSE:RACE) has long been a luxury name in automotive and has currently delved into hybrid vehicles. The performance from a hybrid vehicle that uses both a combustion engine and electric motors is outstanding, and the company is creating a new genre of fuel-efficient super cars.
The fundamentals warrant a look, as Ferrari is compelling from a valuation perspective. Ferrari boasts a market cap of $9.0 billion, and Tesla stock has a market cap of $28.2 billion. If we compare the market cap to revenues, RACE stock stands out; as the automaker has revenues on $3.35 billion, while Tesla has revenues of $4.57 billion. Clearly the premium has been placed on TSLA stock, which leaves upside potential for RACE stock.
The stock charts also warrant a look because, as a trader, the chart is my most effective tool in deciphering trends. Being on the right side of a trend is detrimental in generating positive returns.
The following chart illustrates the trading range that has stalled Tesla stock.
Chart courtesy of StockCharts.com
The chart above illustrates the price action that has contained the price of TSLA stock since shares peaked in 2014. The price has been range-bound between $188.00 and $270.00. The price has been unable to close out of this range on a monthly basis. Given the benchmark index ability to make new highs, there is something left to be desired as Tesla stock is underperforming.
The lower segment of the chart illustrates the moving average convergence divergence (MACD). The MACD is an indicator that uses moving averages to signal bullish or bearish momentum. Moving average line crossings are used to distinguish between a bullish or bearish signal.
In December 2014, TSLA stock generated a sell signal when the monthly MACD signal crossed in a bearish manner. This signal effectively halted any sustained gains, and resulted in reaffirming the trading range. The signal is still bearish and, as a bullish trader, I find it wise to wait for a bullish cross.
The TSLA stock chart has yet to give me an impetus to enter a trade, but the RACE stock chart is constructive, as illustrated below.
Chart courtesy of StockCharts.com
There are two parallel lines that define this trend. The pattern is known as an ascending channel. An ascending channel has two trend lines that define the upper and lower bounds. The share price oscillates between these two lines for as long as the trend permits. This is a bullish pattern, as both resistance and support have positive slopes, so as time persists, these two levels continue to increase.
Healthy bull markets are characterized by impulse waves (highlighted in green) that are followed by consolidations waves (highlighted in purple). The current consolidation wave, if viewed as a mid-point consolidation, would produce a price target of $54.00, which coincides perfectly with the ascending channel.
The chart of RACE stock is bullish, and the chart of TSLA is neutral as best. If I were given an option of one investment over the other, I would choose RACE stock.
The Bottom Line on TSLA Stock
Tesla Motors is great car manufacturer with superior technology that has produced an exceptional product. It is unfortunate that the Tesla stock price has stalled in recent years. Ferrari is a great alternative name in the automotive space, but with a far superior history of building race-inspired super-cars. At this juncture, I prefer RACE stock over TSLA stock, and the fundamentals, as well as the price chart, support my view. I will retain my bias until the price chart changes enough to warrant a change of opinion.
If the alternative automotive sector piques your interest, I suggest you take a look at following report that our top tech editor just released: “17 Million Drivers No Longer Pay for Gas?” Click HERE for the full report.