After Tesla stock lost the ‘critical battle line’, stock plunges toward worst month, quarter and year in history

The shares of Tesla Inc. fell more than 5% on Tuesday after analysts cut their price target by a third following the stock’s fall below a “critical battle line” of $150 per share.

Evercore analysts Chris McNally, Doug Dutton and Isaac Avla lowered their price target on the electric vehicle maker’s stock from $300 to $200 on Tuesday, saying its strengths are already appreciated by investors and that “emotional” support for the shares is breaking down.

Shares of Tesla TSLA,
fell 5.4% to $141.80 on Tuesday after closing below $150 for the first time in more than two years on Monday, a level analysts say was a key test of confidence of investors in the stock.

The stock is now down more than 46% this quarter, which would easily be the worst calendar quarter in history, dwarfing a 37.5% drop in the second quarter of this year; and more than 27% for the month of December, which would be the worst month ever, after falling 24.6% in December 2010.

The stock is now down 60% so far in 2022 — which would also be its worst year ever — and Tesla’s market cap fell to less than $450 billion in intraday trading Tuesday, putting it lower than Johnson’s market cap & Johnson for the first time since November 2020. If that change continues through the end of the session, Tesla would be the eighth most valuable stock in the S&P 500 Index SPX,
after previously ranking as high as No. 5 on that list. Before today, Tesla was both the most active and the worst performing stock in the index.

Elon Musk, Tesla’s CEO, has sold billions of shares to contribute to a sell-off since buying Twitter for $44 billion in October, and has not indicated he is done selling, which analysts say was a contributing factor to the price reduction. target.

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“We now know that Elon has sold an additional $3.5 billion and we have yet to receive the ‘all done’ tweet,” the analysts said in a note Tuesday. “The $150-163 technical level was seen as a critical battle line to defend beyond further weakness. . . and fail.”

“Technicals are essentially emotional entry points to stocks and we are now at a point where if you bought Tesla 2 years ago you lost money,” they continued.

The Evercore analysts praised Tesla’s margin profile, but said investors are “already well aware of these benefits, but now also need to battle demand assumptions” for next year through 2025. They wrote that growth in China has stalled , where Tesla owns about 10% of the shares. the electric vehicle market, and that a “partisan elephant in the room” has become harder to ignore as Musk tweets more right-wing rhetoric.

“Investors now fear damage to the US brand given the typical demographic of electric vehicle buyers (~40% from CA, maybe 70%+ from blue states) in a declining backlog environment,” the analysts wrote.

The comments added to concerns over Tesla’s stock, which suffered its worst week since 2020 last week after Musk announced the sale of $3.5 billion in Tesla stock and called for a major investor, Leo KoGuan, for new leadership at the manufacturer. of electric vehicles. The stock sale marked the second time Musk has unloaded a large share of Tesla stock since buying Twitter.

Other Tesla analysts this week expressed increasing frustration with Musk’s activity on Twitter. They said his erratic reign there – which most recently included temporarily suspending journalists, blocking links to other social platforms and conducting an online poll in which a majority of Twitter users said he “should step down as head of Twitter” – has distracted him from running Tesla. Others have expressed concern that the uproar there, along with the recovery of far-right accounts, threatened to rob the company of advertising revenue.

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Oppenheimer analysts cut Tesla stock on Monday, saying his “non-Tesla efforts” were hard to separate from their analysis of Tesla.

“The combination of Twitter’s unclear monetary needs and dwindling options for Mr. Musk to meet those needs amid the widespread public backlash caused by inconsistent standard application for Twitter users, particularly the banning of select journalists, pushes us to the sidelines at TSLA,” the Oppenheimer said to analysts.

“We see potential for a negative feedback loop from Twitter advertisers and users leaving due to inconsistent standards, resulting in increased funding needs that could lead to incremental TSLA sales just as Tesla’s competitive environment intensifies,” they continued.

Wedbush analyst Dan Ives said in a note Monday that Musk had used Tesla stock as “his own personal ATM” and that his ownership of Twitter had become an “albatross” to Tesla.

“Time to end this nightmare as CEO of Twitter,” he said.

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