Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Tesla's Steep Plunge Divides Analysts On Future Direction Of Stock

By Investing.com (Haris Anwar/Investing.com)Stock MarketsMay 25, 2022 07:20
ng.investing.com/analysis/teslas-steep-plunge-divides-analysts-on-future-direction-of-stock-113355
Tesla's Steep Plunge Divides Analysts On Future Direction Of Stock
By Investing.com (Haris Anwar/Investing.com)   |  May 25, 2022 07:20
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
  • Tesla stock is down more than 40% this year amid a broad-based sell-off in high growth companies
  • Analysts warn the carmaker's difficulties in China have become impossible to ignore
  • Elon Musk's offer to buy Twitter is also weighing heavily on the stock

Shares of the world's largest electric carmaker, Tesla (NASDAQ:TSLA), have been dropping sharply for more than a month now, closing on Tuesday at $628.16, down almost 7% for the day.

TSLA Weekly TTM
TSLA Weekly TTM

The stock has been hurt by a combination of factors, including a grim macroeconomic outlook, a surge in COVID cases in China, and Elon Musk's pledge to buy Twitter (NYSE:TWTR) in a $44-billion deal.

Unlike last year's corrections, when Tesla managed to rebound quickly, this time seems different. Amid the broad-based sell-off in high-growth companies, losses on Tesla shares—the stock is down more than 47% so far year-to-date—are much steeper than other market heavyweights, such as Apple (NASDAQ:AAPL), which is down more than 20% this year.

Tesla has, so far, successfully navigated current global supply disruptions and soaring raw-material costs more effectively than the competition. It has produced 11 consecutive quarters of profits while consistently beating analysts' production estimates.

However, there are signs that the latest coronavirus outbreak in China, which extended already ongoing lockdowns that led to multiple production disruptions at its factory in Shanghai, will hurt production in the second quarter.

In a recent note, Morgan Stanley analyst Adam Jonas warned that the China supply constraints could potentially drive a "substantial" miss on deliveries in Q2. According to Bloomberg data, analysts' average estimate for Tesla's second-quarter deliveries stands at around 303,000 units, down 12% from the end of March.

Uncertainty Surrounding Twitter Deal

In addition to China's lockdowns and the worsening macroeconomic environment, Elon Musk's involvement in securing favorable terms on Twitter isn't helping either. The billionaire Tesla chief executive recently tweeted that the deal is "on hold" until he gets more information about the portion of the social media platform's users that are spam accounts.

This happened as both Tesla, which Musk relies on for funding the deal, and Twitter stocks tanked. Twitter's board, meanwhile, says it intends to enforce the agreement, which calls for him to pay $54.20 a share. This uncertainty weighs heavily on Tesla investors who worry that Musk will have to sell more of his holdings in the EV company to fund the deal. Adding additional pressure: the agreement also includes a $1 billion "reverse termination fee" that would be triggered if Musk walks away from the deal.

Given the myriad headwinds, Tesla's latest troubles have created a sharp divide among the analyst community regarding the company's stock.

Among 42 analysts polled by Investing.com, though 22 individuals surveyed gave TSLA a buy rating, an almost equal number rated it either a sell or consider it neutral.

TSLA Analyst Consensus
TSLA Analyst Consensus

Source: Investing.com

Their average 12-month price target of $973.84 indicates a 55.03% upside, but the price range is broad: from a low of $250 to a high of $1,620, a sign of just how uncertain analysts are of the stock's future trajectory.

In a note on Tuesday, Bernstein said it's concerned that Elon Musk's purchase of Twitter could cause Tesla shares to decline yet further. The note said:

"Perhaps the bigger - but less probable - financial risk is that Musk completes the deal, and TSLA's share price declines materially, triggering a margin call."

However, Tesla bulls have a solid reason to stay faithful. Tesla's shares have climbed more than 22,000% since it went public in 2010, providing investors an annual return of 58%. The S&P 500, on the other hand, has returned 373%, including dividends over the same period, averaging 15% a year.

While reiterating Tesla's price as overweight, Piper Sandler said in a note that the stock is still a "cornerstone holding."

"We are cutting our estimates and price target to reflect COVID-related weakness in China, as well as a higher WACC (weighted average cost of capital) assumption in our DCF model. However, we still regard TSLA as a cornerstone holding in any 'advanced mobility' portfolio."

Bottom Line

Any pullback in Tesla shares has proven to be a lucrative trade for dip buyers. But this time looks different, given the multitude of challenges the company faces, including production disruptions in China, a worsening macro environment, and the uncertainty surrounding Musk's Twitter deal.

***

Interested in finding your next great stock or ETF idea? InvestingPro+ gives you the chance to screen through 135K+ stocks to find the fastest growing or most undervalued stocks in the world, with professional data, tools, and insights. Learn More »

Tesla's Steep Plunge Divides Analysts On Future Direction Of Stock
 

Related Articles

Tesla's Steep Plunge Divides Analysts On Future Direction Of Stock

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email