Tesla stock ‘holiday coal’ will turn into ‘diamond’ over long term, Canaccord Genuity says
Tesla sentiment is “cosmically bad” and its shareholder base is “distraught,” but this too shall pass, according to Canaccord Genuity. The firm shared several reasons it thinks Tesla shares — which are in their worst drawdown in the stock’s history — should recover next year and reminded investors this is just “deja vu all over again.” “We are adjusting our estimates and price target to $275 (from $304) but — with the current pressure and some patience — trust this holiday coal will turn into a long-term performance diamond,” Canaccord analyst George Gianarikas said in a note Wednesday. He maintained his buy rating on the stock. Tesla ended Wednesday’s session at $137.57, so the analyst’s revised target assumes roughly 99% upside. Shares are down by more than 60% in 2022. “We have been here before and see this as a moment in time to properly discern signal from noise,” Gianarikas added. “While the economic backdrop could remain treacherous, we see multiple green shoots for Tesla over the next 6-12 months that should help the stock, particularly from current levels.” The company’s near-term fundamentals are mixed: Demand from China is “tepid,” Gianarikas said. Further, there appears to be an air pocket in U.S. demand, the analyst noted. Meanwhile, production in Austin and Berlin seems to be on track, he added. Canaccord sees the potential for Tesla’s recovery next year: China reopening could help ramp up sales. Further, Tesla could also see a boost from electric vehicle tax credits in the Inflation Reduction Act. The U.S. Treasury Department is delaying guidance on the credit until March . In addition, improvements in the inflation backdrop could create a margin tailwind, and in improving supply of battery cells could help with fundamentals, Gianarikas said. “Remarkably, the current performance drawdown is the worst in Tesla’s stock history — even with a head-spinning decade of volatility,” he said. “While current fundamentals appear fairly uncertain, we look to potential green shoots in 2023 and sustained extraordinary growth beyond to help improve equity performance.” In the long term, Tesla is still the “sustainability behemoth” and its improving lead in electric vehicles as well as its participation in tangential markets like solar, energy storage, vehicle autonomy and robotics add “duration and durability” to the company’s growth story, the analyst said. —CNBC’s Michael Bloom contributed to this story.