Tesla shares dropped in Wednesday premarket trading after an analyst at Baird Equity Research lowered the share-price target for the S&P 500 member. The stock later staged a rebound.
“We are lowering estimates to be conservative due to recent comments on outlook by Musk and potential for weakening of demand,” said Ben Kallo, Baird senior research analyst, in a note to clients on Wednesday.
Kallo trimmed Tesla’s
price target from $316 to $252 but reiterated an outperform rating.
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Tesla’s stock dropped 4% to around $104 in early Wednesday premarket trading and then later rebounded to nearly $112.
This is the second price-target cut in under a week after Wedbush analysts slashed their target by 30% to $175 from $250 before the Christmas break, citing “demand cracks,” helping to set the stock on a path to its longest losing streak since 2020.
Last week, Evercore analysts cut their price target to $200 from $300, saying “emotional” support for the stock was breaking down.
Kallo lowered Tesla delivery estimates for the fourth quarter and for 2023 to take into account reports of a slowdown in production in the Giga factory in Shanghai in January and a weakening macro environment.
He referenced the way in which the 2008 financial crisis placed “tremendous pressure” on car manufacturers, with both General Motors and Chrysler filing for bankruptcy.
A recessionary impact on automobile demand could put pressure on Tesla’s product as consumers’ discretionary income could be negatively affected. Tesla’s premium offerings have relatively high average selling points, Kallo pointed out.
He is more bullish than other analysts, though, adding that Baird is a buyer of the stock and that Tesla is “best positioned in the auto market as EVs continue to take share of the total market.”
Kallo said in the Baird note that, despite the Shanghai production slowdown, he believes Tesla has “many demand levers to pull including an increase in vehicle leasing and additional supercharging incentives.”
He said that he remained “optimistic” over Musk’s own outlook for the coming year, after Musk vowed in a Twitter Spaces conversation that he wouldn’t sell Tesla shares until 2025. “We believe this portion of the overhang from Twitter may finally be removed for 2023,” Kallo said.
Tesla’s stock has plummeted 69% to date in 2022, while the S&P 500
has declined almost 20%.