Tesla Stock Faces Technical Pressure Despite Optimus Growth Expectations

Key Insights

• Tesla stock has formed a double-top pattern on the daily chart.
• Barclays estimates the humanoid robotics market could reach $200 billion.
• Tesla is positioning Optimus to offset slowing growth in its vehicle business.

Tesla stock remained under pressure this week after retreating from a May high of $446 to around $423. The decline reflected growing concerns about valuation, rising competition, and slowing vehicle growth. However, analysts at Barclays believe Tesla still has a major long-term catalyst through its humanoid robotics business.

Barclays Argues the Humanoids Will Be a $200 Billion Business

Tesla stock has come under intense pressure in the past few weeks as the recent rebound stalled.  In a report this week, a top Barclays analyst highlighted the humanoid market, where the company aims to become a big name in.

The report noted that the humanoid business will grow to become a $200 billion business, a big increase from the current $2 billion.

This view mirrored what Softbank’s Masayoshi Son said recently, when he said that physical AI and robotics were the next trillion-dollar industry.

If this happens, Tesla will be the main beneficiary as Elon Musk has invested billions of dollars in the sector through the Optimus robot, which is expected to be launched later this year.

Musk has described Optimus as a human companion that handles boring, repetitive, and boring tasks. It will be used mostly by companies, such as warehouses, automobiles, and construction and maintenance. It can also be used in the healthcare industry.

Tesla has not made public any details about the platform, including the pricing, even though analysts predict that it will cost over $20,000.

Optimus to Offset the Slowing Vehicle Business

Tesla hopes that Optimus will help the company offset the slowing and highly competitive automotive business. Its most recent numbers showed that its vehicle deliveries stood at 358k, with most of them being 341k. Its deliveries were lower than what analysts were expecting.

Tesla’s vehicle business is facing a major challenge because of the ongoing competition in key markets. For example, in China, companies like BYD, Nio, Li Auto, and XPeng have continued to gain market share.

The same is happening in Europe, where companies like Volkswagen and Renault are gaining share. Chinese brands, which sell good-quality vehicles at a lower price, are also entering key markets, including Canada and Germany.

Still, Tesla faces some major challenges in the humanoid industry. A crucial one is the rising competition, including firms like Figure AI, Boston Dynamics, Agility Robotics, and AppTronic. Some, like Boston Dynamics and Figure AI are in a pole position in the industry.

The other challenge is that the rosy forecasts about the industry may not pan out as we have seen in some industries in the past. For example, a few years ago, markets were predicting that the cannabis industry would be worth billions of dollars. Today, most stocks in the industry have plunged.

Further, Tesla faces other risks, including the elevated valuation metrics. Data shows that the company has a forward price-to-earnings ratio of over 200, which is much higher than other companies in the industry. For example, companies like Ford and GM have a multiple of less than 20.  Additionally, Tesla’s profitability is in question as it plans to spend $25 billion on its chip plant in Texas.

Tesla Stock Price Technical Analysis

TSLA stock price has formed the risky double-top pattern, a common bearish reversal sign in technical analysis. It formed this pattern at $446 and a neckline at $393, which coincides with the lowest point in May this year.

By subtracting the neckline from the double-top point, one can estimate the height at $50. Subtracting this from the neckline at $396, gives it a target price at $346, which is also along the 50% Fibonacci Retracement level.

The bearish outlook will become invalid if it moves above the key resistance level at $450. Such a move will lead to more gains, potentially to the key resistance level at $500.

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