Tesla rebounds while Morgan Stanley says Selloff Gone Too Far
(Bloomberg) — After losing nearly $300 billion in market value in two months, a growing chorus of Tesla Inc. analysts say the stock price slide has gone far enough, pushing the stock up Wednesday.
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Morgan Stanley analyst Adam Jonas previously said Tesla is approaching its “bear case” price target of $150, which presents an opportunity for investors to buy at a bargain price. Citi analysts upgraded the stock to neutral from sell, saying a decline of more than 50% this year “has balanced out the short-term risk/reward.”
Despite challenges including slowing demand and price cuts in China, Tesla is the only EV maker covered by Morgan Stanley that generates a profit on the sale of its cars, Jonas wrote in a note. The analyst – who also highlighted Tesla̵[ads1]7;s potential to benefit from US consumer tax credits – reiterated his $330 price target.
Shares closed up 7.8% at $183.20 in New York. The share has fallen this year due to rising raw material costs, problems with production and sales in China and pressure on customer budgets. Lately, CEO Elon Musk’s focus on turning around Twitter Inc. has also hit sentiment, with $300 billion stripped from Tesla’s market value in the past two months, according to Bloomberg calculations.
The distraction caused by Twitter must end to stop the stock crash, according to Jonas. “There needs to be some sort of ‘circuit breaker’ around the Twitter situation to calm investor concerns around Tesla,” he wrote.
Despite all the challenges Tesla has faced this year, Wall Street has mostly remained positive. The majority of Tesla analysts tracked by Bloomberg rate the stock a buy or equivalent, while shares would need to rise as much as 57% to reach the average analyst target price. This year’s decline has left the stock trading at 31 times forward earnings, down from more than 200 times in early 2021.
Citi analyst Itay Michaeli, who upgraded the stock on Wednesday, has one of the lowest price targets on the Street, at $176. The analyst said he became more bullish because Tesla’s decline means some of the overly bullish expectations in the stock, including unit sales, have now been priced out.
–With assistance from James Cone, Esha Dey and Boris Korby.
(Updates the stock move in the fourth paragraph. An earlier version of this story corrected Citi’s assessment in the second paragraph.)
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