Tesla’s share decline could be a buying opportunity, analysts say

Morgan Stanley analyst Adam Jonas previously said that Tesla is nearing its “bearfall” price target of $150, giving investors an opportunity to buy at a bargain price. Citi analysts upgraded Sell shares to neutral, saying a more than 50% plunge this year “has offset the short-term risk/reward tradeoff.”

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

Shares closed up 7.8% in New York at $183.20. The stock has plummeted this year due to rising raw material costs, problems with manufacturing and sales in China, and pressure on consumer budgets. Lately, Chief Executive Officer Elon Musk’s focus on the U-turn at Twitter Inc. has also hit the mood, with $300 billion wiped away from Tesla’s market cap over the past two months, according to Bloomberg calculations.

The distraction created by Twitter must end to stop the stock slide, Jonas says. “There needs to be some kind of mood-breaker surrounding the Twitter situation to allay investor concerns about Tesla,” he wrote.

Despite all the challenges Tesla has faced this year, Wall Street has remained mostly bullish. A majority of Tesla analysts tracked by Bloomberg rate the stock as a Buy or Equivalent, while shares would need to rise a whopping 57% to reach analysts’ average price target. This year’s plunge has seen shares trading at 31 times forward earnings, compared to 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’s turning more bullish because Tesla’s plunge means some of the overly optimistic expectations for the stock, including unit sales, have now been priced out.