Despite concerns about the return of China's Covid Zero policy, which could hit Tesla's (TSLA.US) factories, shares of Elon Musk's flagship company are gaining nearly 6% today, thanks to an upgrade in Citi's rating on the stock. The company's shares have lost nearly 20% in a month despite a rebound in the indexes:
- Citi analysts raised their recommendation for Tesla from 'Sell' to 'Hold', pointing out that the company's capitalization has shrunk by $600 billion over the course of the year, perhaps indicating panicky investor reactions. According to analysts, the company is poised to benefit from the U.S. Inflation Reduction Act, and its long-term prospects may improve against its competitors in the face of growing production capacity. Recall that although Q3 results fell short of analysts' expectations they were a record high in the company's history;
- Tesla has had its weakest stock market year ever and is losing more than 50% in 2022, despite record revenues and profits. Primary risks include a slowdown in the Chinese economy and the return of restrictions that could hit production and the supply chain, growing competition from Rivian (RIVN.US), NIO (NIO.US), Nikola (NKLA.US) and larger automakers like Volkswagen, Porsche and Toyota, which are also ramping up EV production. There are also growing concerns about demand for new cars in the context of a slowdown and high interest rates;
- In addition, the stock is being dragged down by image issues related to Musk's acquisition and involvement in Twitter and 'politicization', as well as concerns that the billionaire may start 'neglecting' Tesla.
Tesla shares (TSLA.US). H4 interval. The stock is in a dynamic downtrend, the main resistance is marked by the trendline and the overlapping 50-session average (black line), which currently runs around $193 per share. The NASDAQ index (yellow) has done much better during the past month. Source: xStation5