• Losses on Tesla shares: interest rate hikes, supply chain problems and the like weigh on them
• Wall Street analysts higher than they have been since 2015
• However, some analysts remain skeptical – P/E still very high
Tesla investors may have had little to smile about this year. Although the company was able to increase its deliveries – in the third quarter the electric car manufacturer set a new record with 344,000 vehicles – and the Musk Group was also able to more than double its profit in the last quarter compared to the same period last year, but the Tesla share went down on the US tech exchange NASDAQ so far this year by around 48.9 percent to 179.82 US dollars (closing price on December 6, 2022). During that downturn, Tesla slipped back below the $1 trillion market cap and lost its position as the fifth most valuable company on the S&P 500 to Berkshire Hathaway.
Several factors are weighing on Tesla stock
Various factors have weighed on Tesla stock over the past few weeks and months. First, the US Federal Reserve’s interest rate hikes to combat runaway inflation have hurt growth stock valuations. The resolute action of the monetary watchdogs raised concerns on the market that the Fed could slow down the US economy so much with its interest rate hikes that it could slide into a recession in the coming year, which in turn could have a negative impact on demand for Tesla’s electric cars.
In addition, Tesla is still struggling with problems that have weighed on the global economy since the beginning of the corona pandemic, such as supply chain problems and rising raw material costs, which were further fueled this year by Russia’s war of aggression in Ukraine. Due to the Chinese government’s strict measures against the spread of the corona pandemic, there were also several production interruptions at Tesla’s factory in China. Fears of a possible impending recession next year are also weighing on sentiment, as demand for Tesla’s relatively expensive cars could then fall.
And as if that wasn’t enough, the chaos surrounding the Twitter takeover has also come to an end Elon Musk put a strain on the car manufacturer’s share price. This year, the Tesla boss has sold a large number of Tesla shares several times, and Tesla shareholders are concerned that the CEO could spend a lot of time on Twitter in the future – time he lacks for Tesla.
Analysts more optimistic than they have been since 2015
Analysts are now increasingly optimistic following the Tesla stock downturn. They are betting that the stock has been oversold, and according to Bloomberg data, more than 60 percent of analysts currently recommend Tesla shares to investors as a buy – a higher percentage than at any time since 2015. According to Bloomberg, ratings for Tesla stock have steadily increased this year. There were reportedly two upgrades in November alone, while other analysts reiterated their optimistic stance.
Citigroup analyst Itay Michaeli recently upgraded Tesla shares, Bloomberg reports. In his opinion, valuation is more balanced after the sell-off, and Tesla’s strong competitive advantage in the electric vehicle market is helping the company weather a downturn. Morgan Stanley’s Adam Jonas explained that Tesla is the only EV manufacturer covered by the bank that makes a profit from the sale of its cars. “In a slowing economic environment, we believe Tesla’s ‘gap to competition’ has the potential to widen, particularly as EV prices pivot from inflationary to deflationary,” said Bloomberg Jonas.
There is also optimism among small investors at the moment. As Bloomberg reports, according to data from Vanda Research, they continue to push into the stock.
However, some analysts remain skeptical
But not all analysts are so optimistic. As Bloomberg reports, some analysts remain skeptical the worst is over as the stock remains higher price-earnings ratio About 27 percent of analysts tracked by Bloomberg recommend holding Tesla stock, while 13 percent recommend selling it.
“Tesla’s stock price remains high on nearly all valuation metrics relative to traditional automakers due to its unique growth profile,” quotes Bloomberg Bernstein analyst Toni Sacconaghi, who warned that broader market pressures amid higher interest rates and slower consumer spending “are likely to disproportionately move higher rated stocks like Tesla.”
It remains to be seen who will ultimately be right – Tesla bulls or bears.
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