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Tesla stock has rebounded from a key support: should you buy?

By:
on Nov 29, 2022
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  • Bernstein reiterates Tesla at "underperform" with downside to $150 a share.
  • Analyst Toni Sacconaghi is dovish on concerns of a slowdown in demand.
  • Tesla stock is currently down more than 50% versus the start of the year.

Tesla Inc (NASDAQ: TSLA) is rebounding after testing a key support last week around $170. But a senior Bernstein analyst says this stock is not out of the woods just yet.

Tesla stock could stoop at $150 a share

Toni Sacconaghi is sticking to his underperform rating on the leading U.S. electric vehicles manufacturer. His price objective of $150 translates to a near 20% downside from here.

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The analyst agrees that valuation is enticing but remains dovish on Tesla Inc primarily on concerns of a slowdown in demand. His note reads:

We believe that Tesla’s decline is primarily attributable to investor concern about softness in demand, particularly in China, amid collapsing order lead times for cars.

Consequently, Tesla stock is down more than 50% for the year.

The said weakness was evident in its latest reported quarter when Tesla came in shy of Street expectations for revenue.

Why else is Sacconaghi dovish on Tesla

Sacconaghi also sees the $44 billion acquisition of Twitter as another headwind (read more). That’s in line with a recent Morgan Stanley survey in which nearly 75% of the respondents attributed the recent underperformance in Tesla stock to a distracted Elon Musk.  

Added competition and a looming recession could further weigh on demand, the analyst added.

Chinese EV market has grown explosively at 126% YTD through September. But Tesla’s EV growth in China has been 55%. The worry is that Tesla’s current models may be reaching saturation.

According to Sacconaghi, the EV company will either have to lower prices and take a hit on margins or depress its growth trajectory – neither of which paints a rosy picture for the Tesla stock.