(Bloomberg) – After losing nearly $300 billion in market value in two months, a growing number of Tesla Inc. thinks the stock price has fallen far enough, pushing the stock higher on Wednesday.
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Morgan Stanley analyst Adam Jonas previously said that Tesla is close to its “discount” price target of $150, providing an opportunity for investors to buy at a bargain. Citi analysts upgraded the stock to neutral from sell, saying that the more than 50% drop this year “has balanced short-term risk/reward.”
Despite challenges including slowing demand and falling prices in China, Tesla is the only electric vehicle maker guaranteed by Morgan Stanley to make a profit from selling its vehicles, Jonas wrote in a note. The analyst – who also highlighted Tesla’s potential to benefit from consumer tax credits in the US – reiterated his $330 price target.
Shares rose as much as 4.4% to $177.34 in New York. Stocks have fallen this year due to rising raw material costs, production and sales problems in China, and pressure on customer budgets. Ultimately, CEO Elon Musk’s focus on turning the tide of Twitter Inc. has also hit sentiment, with $300 billion wiping out Tesla’s market capitalization over the past two months, according to Bloomberg calculations.
According to Jonas, the distraction caused by Twitter needs to stop to stop the stock’s slide. “There must be some form of emotional ‘circuit breaking’ around the Twitter situation to assuage investor concerns around Tesla,” he wrote.
Despite all the challenges Tesla has faced this year, Wall Street has largely remained bullish. The majority of Tesla analysts tracked by Bloomberg rate the stock as a buy or equivalent, while the stock will need to rally as much as 80% to reach the average analyst price target. The drop this year 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 is becoming more positive because Tesla’s decline means some overly optimistic expectations about the stock, including unit sales, are now priced in.
–With support from James Cone and Esha Dey.
(Update on stock price action in fourth paragraph. An earlier version of this story adjusted Citi’s rating in second paragraph.)
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