Is Tesla’s stock a buy while down 50% on the year?
Like much of the market, Tesla’s stock has had a bit of a rough year, which many point to as a sign that the automaker’s shares were overinflated. At the time of writing, Tesla’s stock is down about 50 percent on the year — though some bullish analysts see it as an opportunity, rather than a setback.
Above: A Tesla logo on the front of a car. (Image: Eyosias G / Unsplash)
Many growth stocks have been hit with rising interest rates and high inflation, and Tesla faces a few additional barriers that have its shares down about 50 percent on the year. In a recent story, however, Forbes contributors at the interactive financial community Trefis questioned whether Tesla’s stock is a buy or not, especially ahead of key developments expected in 2023.
The Trefis team is reportedly made up of MIT engineers and other Wall Street analysts, and it offers a useful price analysis product for looking at stock prices.
All in all, Trefis reduced its price estimate on Tesla’s stock to $272 for a drop of about 10 percent. Despite this fact, the company’s price target is roughly 50 percent ahead of the current market price for Tesla’s shares at the time of writing. The group also notes that Tesla has had “solid” execution so far with its financials, adding that it has a goal of increasing deliveries by 50 percent each year for multiple years in a row.
Current economic downturn remains a major barrier to most of the auto industry, and concerns of demand destruction in China remain front and center for Tesla. The automaker cut prices on the Model 3 and Model Y by 9 percent in October, and recent reports show Tesla’s Giga Shanghai is shortening shifts, scaling back production and delaying onboarding for new hires.
Tesla isn’t guaranteed to succeed by any metric, though Trefis points out that the company is well-poised to face a long-term, industry-wide shift to electric drivetrains. The community also notes that Tesla’s past margins are some of the auto industry’s best.
As for current and upcoming developments, the team suggests that Tesla’s recent delivery of the Semi is significant, as is the company’s tooling of Gigafactory Texas to begin producing the highly-anticipated Cybertruck next year. In the past year, Tesla also opened and began ramping up production at both Giga Berlin-Brandenburg and Giga Texas, both of which will help expand the automaker’s worldwide production capacity.
There’s no way to predict how Tesla will perform, nor whether it’s stock is worth buying right now. However, Trefis predicts that Tesla will remain “solidly profitable” as its sales continue to increase, which shareholders may read as a good sign.