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Tesla stock bear surprises with upgrade after $600 billion rout

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Tesla stock woes have caught the attention of one noted Wall Street bear on the EV maker.

Citi analyst Itay Michaeli upgraded his rating on Tesla to Neutral from Sell on Wednesday, viewing the company losing more than $600 billion in market cap from November 2021 highs as nearing overdone.

“We believe the year-to-date pullback has balanced out the near-term risk/reward,” Michaeli wrote in a note to clients.

The analyst served up several reasons for the valuation-based upgrade.

“(1) With the multiple contracting to ~30x 2023E EPS, we feel that some of the prior baked-in expectations that we didn’t agree with are out of the stock,” Michaeli explained. “(2) Though our latest model update leads us to reduce [near term] EPS estimates, we still find ourselves slightly above consensus for Q4-2024E EPS. (3) To be sure, macro/competitive concerns are likely to remain an overhang with capacity rising, but as we’ve previously written, in a hard landing scenario Tesla’s long-term competitive position likely also improves and potentially further enhanced by [the Inflation Reduction Act].”

Michaeli’s new price target is $176, up from $141.33 previously. Tesla stock was up 1% in pre-market trading on Wednesday.

Other upgrades on Tesla shares on Wall Street could be lurking into year end, based on the rout in recent months that has partly reflected concerns about CEO Elon Musk being distracted by running Twitter.

In the past month alone, Tesla’s stock has shed 20% — compared to a 6.6% rally in the S&P 500.

“This is a very nervous few months ahead for Tesla investors as they remain the ones that have been punched again and again by the Musk Twitter antics and the stock now is deep in the investor penalty box until deliveries hit in early January and we get a better sense of the 2023 delivery/production trajectory,” warned Wedbush analyst Dan Ives.

Ives — a long-time Tesla bull — removed the stock from the Wedbush best ideas list earlier this month.

A modified Tesla Model X drives into the tunnel entrance before an unveiling event for the Boring Co. Hawthorne test tunnel in Hawthorne, California, U.S., on December 18, 2018. Robyn Beck/Pool via REUTERS

A modified Tesla Model X drives into the tunnel entrance before an unveiling event for the Boring Co. Hawthorne test tunnel in Hawthorne, California, U.S., on December 18, 2018. Robyn Beck/Pool via REUTERS

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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