Morgan Stanley analyst Adam Jonas stated Wednesday that Tesla is nearing his $150 “bear case price target”, which presents an opportunity for investors looking to buy at a bargain cost. Citi analysts raised the shares to neutral, from sell, stating that the near-term risk/reward ratio was balanced by a more than 50% slump in the stock this year.
Jonas noted that Tesla, despite the challenges of decelerating demand in China and price cuts in China is the only electric vehicle manufacturer covered by Morgan Stanley, generates profit on its cars. He reiterated his $330 price target, highlighting Tesla’s potential benefit from US consumer tax credits.
Shares of Tesla climbed as high as 1.9 percent to $173.11. This year’s stock slump has been caused by rising raw material costs, problems in China and tighter customer budgets. According to Bloomberg calculations, the focus of Chief Executive Officer Elon Musk on turning around Twitter Inc. has also hurt sentiment with Tesla’s market cap being wiped out by $300 billion in just two months.
Jonas believes that the stock slide must be stopped by a stop to the Twitter distraction. He wrote that there must be a form of sentiment “circuit breaker” around the Twitter situation in order to calm investor concerns about Tesla.
Wall Street has generally remained bullish despite all the difficulties Tesla has had this year. Bloomberg tracks the majority of Tesla analysts who rate the stock as a buy or equivalent. However, the shares must rally an astounding 80 percent to reach the median analyst target price. The stock is now trading at 31x forward earnings this year, a decrease of more than 200 times in the early 2021.
Itay Michaeli, a Citi analyst, upgraded the stock Wednesday and set a $176 price target. According to the analyst, he is becoming more positive as Tesla’s slump has meant that some of the excessively bullish expectations for the stock, including unit sales, have been priced out.