Tesla rallies as one of the stock’s few bears raises his rating

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THE RATINGS GAME

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Tesla Inc. stock jumped more than 6% on Wednesday as one of the few Tesla bears left on Wall Street turned a bit more positive and a Tesla bull said that a “Twitter overhang” is tempered by still-healthy demand for the electric-vehicle maker’s cars.

Tesla stock at midday Wednesday was up the most in nearly two weeks, extending its winning streak to a second day to chalk up a nearly 8% gain in two sessions.

Itay Michaeli at Citi raised his rating on Tesla shares to the equivalent of hold from sell, saying that their steep decline this year “has balanced out the (near term) risk/reward.”

Tesla has been through a beating in recent weeks, with November losses surging past 20%, which would be the stock’s worst monthly performance since a drop of 22% in March 2020, at the height of COVID-related factory shutdowns.

Tesla earlier this week ended at a two-year low.

So far this year, the stock is down 49%, compared with losses of around 16% for the S&P 500 index. If that holds, it would be the stock’s worst year on record.

Citi is “slightly above consensus” in its estimate for Tesla’s fourth-quarter per-share earnings, Michaeli said. The analyst expects EPS of $1.33, while the FactSet consensus stands at $1.31.

Citi was one of the last investment banks to rate Tesla stock a sell. According to FactSet, which polls 41 analysts covering the stock, 25 have a buy or equivalent rating. Twelve rate it a hold, and four remain bearish with a sell or equivalent rating.

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Michaeli didn’t exactly give Tesla a ringing endorsement, but he also upped his price target on the stock to $176, from $144.33, implying downside of about 2% over Wednesday’s prices.

“To be sure, macro/competitive concerns are likely to remain an overhang with capacity rising,” the analyst said.

In a hard-landing scenario, however, Tesla’s long-term “competitive position likely also improves and (is) potentially further enhanced” by the recently passed Inflation Reduction Act, Michaeli said.

Also on Wednesday, Wedbush analyst Dan Ives touched on Tesla stock’s recent downdraft, and linked that weakness to Chief Executive Elon Musk’s leadership at his recently acquired Twitter Inc.

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Musk is creating “controversy on a daily basis” at the helm of the social-media company, Ives said in a note. “The perceived overhang of ‘key person risk’ with Musk is a real overhang on Tesla’s stock and not abating.”

Investors fear that Musk will be selling more Tesla stock to fund “Twitter’s red ink,” are concerned that a “brand deterioration” of Musk is being associated with Tesla, and worry that Musk’s attention is now “all focused on Twitter instead of Tesla,” Ives said.

That Twitter overhang is overdone, the analyst said, as demand for Tesla vehicles and the EV maker’s production capacity “is moving in the right direction,” the analyst said.

But “at the end of the day Musk is Tesla and Tesla is Musk,” Ives said.

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