Tesla (TSLA) stock gained 2.2% in Friday’s premarket to $187.14 despite news out a day after Thanksgiving that the electric vehicle (EV) builder leader is recalling a total of about 80,000 automobiles in China due to software glitches affecting battery operation, as well as a seatbelt issue.
Tesla stock is being helped ahead by market glee that arrives in tandem with the euphoric Black Friday sales in the United States. Additionally, CEO Elon Musk tweeted on Thanksgiving that all US drivers will now have access to a beta version of Tesla’s Full Self-Driving (FSD) system.
China’s State Administration for Market Regulation agency filed the recall plan early Friday that forces Tesla to run over-the-air software updates on nearly 68,000 Model S and Model X vehicles. All of the vehicles were imported to China after being produced abroad.
Another nearly 13,000 Model 3 units were recalled for a physical issue regarding seat belts. Of those, the vast majority were manufactured in China. Tesla’s Shanghai factory largely produces Model 3 and Model Y vehicles.
The Chinese state regulator said models recalled for software issues had a problem wherein a software glitch in the battery management system could sometimes force vehicles to stop abruptly. This amounts to Tesla’s 20th recall of the year, but the vast majority of issues did not require owners to take their vehicles back to mechanic shops. Instead, in most cases Tesla discovered the issues and simply updated vehicles remotely.
The market has grown largely immune to these software-based recalls, and on Friday it is clearly ignoring this instance. TSLA stock has risen with the Dow Jones and S&P 500 futures both advancing in the premarket. To be sure, the Nasdaq futures are slightly in the red on Friday morning. Black Friday often provokes a state of market euphoria heading into the holiday season, however, it is important to remember that Friday’s market ends at 5pm GMT (1pm EST) due to the extended Thanksgiving holiday.
Instead traders are more focused on Elon Musk’s tweet about the new FSD offering. Unlike its name, Full-Self Driving is not “full” in any sense of the word. Rather it is an advanced driver assistance system that may eventually become fully autonomous once Tesla’s technology reaches that level. For now, it seems to be possibly a large-scale opportunity for shareholders as a subscription may run as high as $199 per month. With millions of units in operation across the North America, this policy has the ability to generate a fairly large amount of consistent cash flows and increase Tesla’s gross margin.
Tesla Full Self-Driving Beta is now available to anyone in North America who requests it from the car screen, assuming you have bought this option.
Congrats to Tesla Autopilot/AI team on achieving a major milestone!
Tesla’s 7.8% share price surged on Wednesday largely because Citi decided to pull its bearish “sell” rating. The investment bank said TSLA stock has suitably calmed down and reached much more attractive share price levels. In particular, it said Tesla had moved close to 30x 2023 EPS. Citi rearranged its price target to $176.
More bullish is Wedbush Securities’ Dan Ives who has a $250 price target on TSLA stock. On Wednesday, Ives confirmed his belief that Tesla will be able to deliver between 430,000 and 450,000 units in the fourth quarter. This would be a new company record and would also show just how big Tesla is now becoming. This level of delivery would amount to about 1/6th the level of the largest automotive OEMs worldwide – Volkswagen and Toyota.
The 100-day moving average has been below the Tesla stock’s 200-day moving average since May 26. That is quite some time, and there is no reason to think TSLA stock has found its bottom yet. Although quite a few Wall Street analysts are beginning to encircle TSLA with frequent bullish updates.
Wednesday’s spike has lead Tesla shares above the $180 support level. Now about $187 in the premarket, expect bulls to make a run at the psychological $200 level. That price level served as support on October 24 and then as resistance on November 15. Breaking through and closing above $200 would give bulls the opportunity to take a stab at the $234 level, which amounted to clear resistance throughout October.
Below $180 lies the $167.50 and $154 support levels, both of which have a rich history of price action respect. Both worked as resistance in the second half of 2020.
TSLA 1-day chart