Tesla stock bear surprises with upgrade after $600 billion loss

Tesla stock troubles have caught the attention of a well-known Wall Street bear on the EV maker.

Citi analyst Itay Michaeli upgraded his rating for Tesla to Sell Neutral on Wednesday, finding the company lost more than $600 billion in market cap from November 2021 highs as almost overstated.

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

The analyst gave several reasons for the valuation-based upgrade.

“(1) With the multiple contracting to ~30x 2023E EPS, we feel like some of the previously ingrained expectations that we disagreed with are out of stock,” explains Michaeli. “(2) Although our latest model update leads us to reduce [near term] WPA estimates, we are still slightly above consensus for Q4-2024E WPA. (3) Sure, macro/competitive issues are likely to continue to overhang with capacity increases, but as we’ve written before, Tesla’s long-term competitive position in a hard landing scenario is also likely to improve and may be further strengthened by [the Inflation Reduction Act].”

Michaeli’s new price target is $176, up from $141.33 previously. Shares of Tesla rose 1% in premarket trading on Wednesday.

Other upgrades to Tesla stock on Wall Street could be lurking by the end of the year, based on the defeat in recent months, which partly reflected concerns that CEO Elon Musk was being distracted by running Twitter.

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

“These are a very nervous few months for Tesla investors as they continue to be the ones getting beaten over and over again by Musk’s Twitter antics and the stock is now deep in the investor penalty box until deliveries hit in early January and we have a better visibility into the supply/production trajectory in 2023,” warned Wedbush analyst Dan Ives.

Ives – a longtime Tesla bull – removed the stock from Wedbush’s best ideas list earlier this month.

A modified Tesla Model X pulls into the tunnel entrance for a reveal event for Boring Co.'s test tunnel.  Hawthorne in Hawthorne, California, USA, on December 18, 2018. Robyn Beck/Pool via REUTERS

A modified Tesla Model X pulls into the tunnel entrance for a reveal event for Boring Co.’s test tunnel. Hawthorne in Hawthorne, California, USA, on December 18, 2018. Robyn Beck/Pool via REUTERS

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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