BREAKING: Market Gains Fade Ahead Of Fed Minutes
Citigroup (C) upgraded Tesla (TSLA) stock Wednesday, even as the EV giant has been a loser this year, shedding around 52% in 2022, and retreating back to levels near when the company joined the S&P 500.
Citi analyst Itay Michaeli moved Tesla stock to “neutral,” up from “sell,” Wednesday. Michaeli also increased the price target to $176, up from the previous $141.33. Michaeli told investors that the Tesla stock pullback in 2022 has “balanced out” near-term risk and reward.
The Citi analyst also pointed to the recently signed Inflation Reduction Act, and its support for EV and lithium battery expansion, as reasons for long term optimism on Tesla stock.
Tesla stock was up around 2.8% Wednesday ahead of market trading. On Tuesday, shares closed 1.2% higher at 169.91. Early Wednesday, Reuters reported that CEO Elon Musk had stated South Korea was a top candidate for a potential Gigafactory investment. The remarks were reported by President Yoon Suk Yeol following a virtual meeting between Musk and Yoon.
The Citi research note follows Morgan Stanley (MS) analyst Adam Jonas writing late Tuesday that Tesla stock “is approaching our $150 bear case, driven by price cuts in China, decelerating EV demand and other market currents (Twitter, Crypto?)”
Jonas did not change his ‘overweight’ rating and $330 price target on Tesla stock. Jonas added that Tesla is expected to see its revenue grow 37% in 2023, the equivalent of 1.8 million units, with around $15 billion in free-cash-flow.
“All other pure play EV OEMs we cover burn substantial amounts of cash, on our forecasts,” Jonas wrote.
Tesla On Track For Worst Year Ever
“We believe Tesla’s ‘gap-to-competition’ can potentially widen, particularly as EV prices pivot from inflationary to deflationary,” he added. “With respect to the (Inflation Reduction Act) we believe Tesla is by far the best positioned OEM in terms of potential eligibility for consumer tax and production credits.”
However, Jonas also added his voice to the list of analysts who view Musk’s focus on Twitter, and that evolving news cycle, as a Tesla-stock negative.
On Nov. 11, a key analyst and longtime Tesla stock bull issued a warning that Musk’s Twitter fascination was damaging Tesla.
“While difficult to quantify, we believe there must be some form of sentiment ‘circuit breaker’ around the Twitter situation to calm investor concerns around Tesla,” Jonas wrote Tuesday.
Since Musk took over Twitter on Oct. 28, Tesla stock has fallen around 25%.
Musk has slashed roughly half of the social media site’s staff while tweeting frequently about his plans and politics. Musk has also responded personally to customer complaints and suggestions. There has been widespread confusion over verification features being rolled out and there is speculation the company could enter bankruptcy.
Musk also sold 19.5 million Tesla shares for $3.95 billion on Nov. 4, 7 and 8. The decision to sell some of his Tesla stock came just days after Musk finalized his $44 billion purchase of Twitter.
Last week, Musk testified in a Delaware court to defend himself in a shareholder lawsuit.
While testifying, Musk said he expects to “reduce my time at Twitter and find somebody else to run Twitter over time,” according to news reports.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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