MW Tesla's stock selloff is 'way overdone' as EV demand stabilizes, analyst says
By Tomi Kilgore
Wedbush's Dan Ives' bullish support for Tesla comes as Wells Fargo's Colin Langan cut his rating to sell
Shares of Tesla Inc. extended their selloff toward a 10-month low Wednesday, even as Wedbush analyst Dan Ives did his best to support the electric-vehicle giant by saying negative investor sentiment is "way overdone."
Ives said the current bearish narrative is similar to those seen a number of times over the years, when doubters who said Tesla's time to shine was over and EVs were just a fad had been proven wrong. And while Ives said EV demand has clearly moderated, he expects sales and profitability to improve in the coming quarters.
"Now is not the time to throw in the towel on Tesla...we have a high level of conviction at current levels despite the dark black clouds forming," Ives wrote in a note to clients.
The stock $(TSLA)$ dropped 2.7% in premarket trading, which puts it on track to open around the lowest levels seen since May 2023. The stock has tumbled 28.6% year to date through Tuesday, wiping out nearly $226 billion from the company's market capitalization.
In comparison, the Global X Autonomous & Electric Vehicles ETF DRIV has slipped 0.7% this year and the S&P 500 index SPX has gained 8.5%.
Wedbush's Ives reiterated his buy rating on the stock and his $315 price target, which implies 77.4% upside from Tuesday's closing price of $177.54.
Ives is part of the minority on Wall Street, as only 18 of the 50 analysts surveyed by FactSet who cover Tesla are bullish. Meanwhile, 23 are neutral and the number of bears increased to 9, as Wells Fargo's Colin Langan just cut his rating to the equivalent of sell, according to FactSet.
Langan's price target was cut to $125, implying a 30% downside from Tuesday's close.
Ives acknowledged that the EV price wars in China are "brutal," but he said there is a sense that many price cuts are starting to subside into the spring and summer, which is good news for both Tesla and the EV industry.
He said demand is "sluggish" for the first quarter and the "noise" around Chief Executive Elon Musk's $56 billion compensation package is a negative overhang on the stock. However, Ives wrote, "the stock is way overshooting on the negative front as the demand story for Tesla is more in stabilization mode heading to the rest of 2024, price cuts are moderating, battery costs/production is showing strong cost efficiencies, and a Model 2 (sub $30K vehicle) is on the roadmap for the next year."
He said the stock's risk-versus-reward profile is "extremely compelling" at current prices. Ives envisions a valuation for Tesla exceeding $1 trillion, compared with the current market cap of $565.4 billion, as the artificial-intelligence and full-self-driving programs are making "major strides" at the company.
Read: Tesla's Autopilot, other driver-assistance systems get poor ratings from auto-insurance group.
Also read: Tesla's stock chart sends warning to bears that momentum may have bottomed.
"The demand story for EVs globally has clearly moderated, however we believe Tesla is on the broader trajectory to see growth and margin improvement return to the story over the coming quarters," Ives wrote.
-Tomi Kilgore
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March 13, 2024 08:43 ET (12:43 GMT)
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