Tesla’s stock drop may be a buying opportunity, analysts say

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After losing nearly $300 billion in market value in two months, a growing chorus of Tesla Inc. analysts say the share price plunge has gone far enough, sending shares higher on Wednesday.

Morgan Stanley analyst Adam Jonas previously said Tesla is nearing its $150 “bear case” price target, presenting an opportunity for investors to buy at a bargain price. Citi analysts upgraded the stock to neutral from sell, saying a drop of more than 50% this year “has balanced the risk/reward in the near term.”

Despite challenges including slowing demand and price cuts In China, Tesla is the only EV maker covered by Morgan Stanley that makes a profit from the sale of its cars, Jonas wrote in a note. The analyst, who also highlighted Tesla’s potential to benefit from US consumer tax credits, reiterated his $330 price target.

The shares closed up 7.8% at $183.20 in New York. The stock has tumbled this year amid rising raw material costs, problems with production and sales in China and pressure on customer budgets. Chief Executive Officer Elon Musk’s focus on turning Twitter Inc. around has of late also affected sentiment, with $300 billion wiped from Tesla’s market capitalization in the past two months, according to Bloomberg calculations. .

The distraction caused by Twitter must end to stop the stock slide, according to Jonas. “There needs to be some kind of sentiment ‘circuit breaker’ around the Twitter situation to assuage investor concerns around Tesla,” he wrote.

Despite all the challenges Tesla has faced this year, Wall Street has remained mostly bullish. Most Tesla analysts tracked by Bloomberg rate the stock a buy or equivalent, while the shares would need to rise 57% to hit analysts’ median price target. This year’s plunge has left stock trading at 31 times future earnings, down from more than 200 times at the start of 2021.

Citi analyst Itay Michaeli, who updated the shares on Wednesday, has one of the lowest price targets on the street, at $176. The analyst said he was turning more positive because Tesla’s decline means that some of the overly bullish expectations on the stock, including unit sales, have now been dashed.

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