Asset Watch
Tuesday, January 28, 2025
The S&P 500 faces a major test this week, with Big Tech heavyweights like Tesla, Microsoft, Meta Platforms, and Apple releasing quarterly earnings. Moreover, with the first three reporting on the same day the FOMC releases its Monetary Policy Statement (Jan. 29), it could be a wild ride across several financial assets.
But with Tesla lapping the competition recently, does the EV giant also win the fundamental race this week?
Piper Sandler analyst Alexander Potter raised his price target by $185 to $500 a share on Jan. 21, noting that Tesla’s “shift in focus toward AI-powered gains remains compelling.”
“Once Tesla fulfills its current launch pipeline, management’s focus will shift away from launching new cars and toward popularizing Full-Self-Driving (FSD) software,” Potter wrote. “To reflect this, we are now modeling a contribution from FSD licensing and value Tesla’s existing businesses at just below $300 per share.”
In other words, if Tesla’s FSD and AI initiatives perform as expected, they could add another ~$200 per share in fundamental value.
After soaring on the back of Donald Trump’s Presidential victory, Tesla has consolidated over the past month and a half. However, the price action has formed a bull pennant, with the two upward-sloping white lines creating the pole, and the two white lines furthest to the right creating the pennant.
The latter consists of narrowing price action, with the stock making lower highs and higher lows in recent days. Eventually, a breakout or breakdown will occur, but when the pattern is preceded by a sharp move higher (the pole), it typically shifts the risk-reward in the bulls’ favour.
Aligning alongside support from the pennant pattern, Tesla’s 50-day moving average (near $391) is close to the lower white line on the right side of the chart. The combination of trendline and MA support could prove meaningful if Tesla exhibits volatility following the Jan. 29 release.
As always, earnings prints are highly volatile, and positioning ahead of the release is best suited for experienced traders with sound risk management practices.
But Tesla already released its Production, Deliveries & Deployments report on Jan. 2, so investors already have some idea of what to expect. Either way, placing a stop-loss order slightly below the trendline and MA support near $391 could be the best way to position for a rally back to the all-time highs while still limiting potential losses.