Tesla was upgraded to buy at UBS on the view that the stock market slide has provided an attractive entry point for a high-growth business.
Analyst Patrick Hummel kept his price target at $1,100 while upgrading the stock. Tesla
shares ended Wednesday at $725.60, down 31% on the year.
Hummel said the operational outlook is stronger than ever, due to a record-high order backlog and two new gigafactories ramping up. He did reduce his 2022 earnings per share target by 12%, to account for the Shanghai lockdown.
Down the road, he says Tesla’s vertical integration in semiconductors, software and battery to result in superior growth and profitability in the years ahead. “Tesla can outgrow peers with a combination of in-house cell capacity, its lead vs. global competitors in using LFP cells and its high share of directly sourced battery commodities, lithium above all,” he said.
Tesla’s reported plan to cut 10% of salaried workers did not phase Hummel. “For a company growing that fast, there is always risk of gaining too much weight in overhead functions, and the soft macro outlook is a good reason to accelerate efficiency efforts, in our view,” he said.
Tesla’s shares have suffered not just because of the broader slide in tech stocks, but also CEO Elon Musk’s pursuit of Twitter
using pledged Tesla shares to finance his bid. Musk is called a key man risk.
“Elon Musk remains the key person at Tesla, with all the risks associated with that,” he dryly notes. “The actions, social media posts, etc. are highly unpredictable.”