The Nasdaq 100 index has pulled back from its gains above the resistance level and may continue lower.
NAS100 – Weekly Chart
NAS100 soared above resistance at 15,273 but after heading for 16,000 it now trades at 15,565. A failure at this level can go as low as 13,500.
Tesla stock slid 6% after its earnings report with pessimistic warnings growing that the company’s recent 150% stock surge was overdone. Tesla reported $24.9 billion in sales and $0.91 earnings per share for the second quarter, which was above forecasts, but the company is “egregiously overvalued” at $273, said Roth analyst Craig Irwin, who has an $85 price target on Tesla.
Neither AI or charging expansion are “financially material for Tesla,” according to Bernstein analyst Toni Sacconaghi, who has a $150 price target for Tesla, which is among the lowest among major firms. In a note to clients, David Trainer of equity research firm New Constructs, said Tesla’s “fundamentals are completely disconnected from reality” and suggested a company whose stock should be worth as little as $26.
Netflix stock also fell despite beating expectations for subscriber numbers in a big way. Netflix reported an additional 5.9 million new subscribers for the second quarter, while revenue rose 2.7% to $8.2 billion.
“Given the sheer number of unknowns, it is hard to have any conviction to the upside or to the downside,” research firm Moffett Nathanson said. “While the growth of Netflix 1.0 (pre these strategic shifts) had clearly begun to stagnate, investors seem willing to dream that Netflix 2.0 will now be able to reignite faster revenue growth.
The comments regarding both Netflix and Tesla highlight that this year’s tech stock rally, which was largely driven by future prospects of AI, is overdone. It would be dangerous to take long positions now. With frothy valuations, it leaves investors vulnerable to shock events.
Traders can watch this area for an extended pullback if tech earnings continue to slow.
