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Author: Genetec A baby step   |   Latest post: Thu, 23 Mar 2023, 11:42 AM


3 Reasons Tesla Stock Can Rise

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Updated Feb. 6, 2023 1:14 pm ET / Original Feb. 6, 2023 8:00 am ET


For Tesla TSLA +2.52% and its investors 2023 has started out about as well as 2022 ended badly.

After dropping about 54% in the final three months of 2022, Tesla (ticker: TSLA) stock is up about 54% in 2023 coming into Monday trading. There are a few reasons for the rebound, including China, tax credits, and CEO Elon Musk.

Wedbush analyst Dan Ives has been surveying Chinese car buyers since Tesla cut prices for its vehicles there in early January and he believes the reductions are working.

The price cuts have “resulted in a clear demand driver for Tesla in this key China region and, coupled with the reopening post lockdowns, are having a meaningful impact for Tesla in the field over the last few weeks,” wrote Ives in a Monday report.

He added that Tesla has ramped production at its Shanghai plant to roughly 80,000 vehicles a month, another sign of rising demand. Tesla delivered about 66,000 from the facility in January.

Others see demand increasing after the cuts as well. Wall Street now projects Tesla will deliver about 426,000 cars in the first quarter of 2023, up from prior estimates at the start of the year of about 420,000 units. Tesla delivered about 405,000 units in the fourth quarter, which was a record for the company.

Ives rates shares Buy. On Monday he raised his price target to $225 a share from $200.

His perceived demand tailwind in China is one of the reasons he is feeling better about Tesla stock. Tax credits and Elon Musk are two additional factors.

This past week, the IRS—the Treasury subsidiary charged with implementing new U.S. EV purchase tax credits—raised the price cap for a Tesla Model Y to qualify for the credit to $80,000 from $55,000. That means more Model Y trims qualify for the credit and the bump even allowed Tesla to raise the price of a Model Y by about $1,000.

Tesla cut prices for Model Ys in the U.S. earlier in 2023. The price of a new Y is still about $12,000 lower than it was at the start of the year.

Ives sees a third positive factor for the company—the Twitter overhang is slowly fading away. Tesla CEO Elon Musk bought Twitter in October 2022 and shares are down about 17% since then. The Nasdaq Composite COMP –1.00% is up is up about 11% over the same period.

“For the last eight months the Twitter soap opera with Musk cast a long, dark shadow over Tesla’s stock,” wrote Ives. “We believe with Twitter itself starting to stabilize more from an advertising perspective along with cost cutting kicking in, the worries around Musk needing to sell more Tesla stock to fund Twitter losses has moved into the background.”

Tesla stock was up about 3.5% in early trading at $196.66 a share. The S&P 500 SPX –0.61% and Nasdaq Composite were down 0.4% and 0.6%, respectively.

Along with Ives’ bullish comment, Tesla stock is also moving after Musk was found not liable for shareholder damages associated with his 2018 “funding secured” tweet. A California jury delivered that verdict Friday after the market closed for trading.

With Ives’ bump, the average analyst price target for Tesla stock now sits at about $193 a share, according to FactSet. About 65% of analysts covering Tesla stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%.



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