Is Tesla Stock a Buy Amid Second Analyst Price Target Cut?

Stocks to buy
  • Daiwa Capital analyst Jairam Nathan cut his price target for Tesla (TSLA) shares on Monday.
  • TSLA stock began to drop in pre-market trading and the slide is continuing on Tuesday with a new 2022 low close expected.
  • The story doesn’t change for long-term growth investors — being able to buy Tesla stock at a steep discount is an opportunity.
The Tesla (TSLA Stock) logo on the side of a building.

Source: Michael Vi / Shutterstock.com

A terrible year for Tesla (NASDAQ:TSLA) shareholders got even worse today. TSLA stock has been in a slump since early April. In fact, since April 4, shares have lost around 45% of their value. 

The usual suspects have played a role in this dismal showing. Fears over inflation, rising interest rates, recession and war. In addition, as tech companies report earnings and issue disappointing guidance for coming quarters, it can be a drag on the entire sector. In the case of TSLA stock, the latest challenge is an analyst price target cut. Yesterday, Daiwa Capital analyst Jairam Nathan kept his “outperform” rating for Tesla stock, but cut 2022 earnings-per-share estimates and slashed his price target from $1,150 to $800. This is the second notable price target reduction for TSLA stock in under a week.

The reaction for many investors might be to hit pause on any potential TSLA purchases. However, with Tesla stock headed for its lowest close of 2022, now is a great time for investors focused on long-term growth to add TSLA to their portfolios.

Ticker Company Current Price
TSLA Tesla $620.75

Much of TSLA Stock’s Performance Is Due to Twitter

One of the key reasons I don’t sweat Tesla stock’s awful performance over the past six weeks is Twitter (NYSE:TWTR). Recall that I pointed out earlier that TSLA’s 45% slump started on April 4. That just happens to be the day it became public news that Tesla CEO Elon Musk had been buying up TWTR stock.

That kicked off what has become an absolute circus as Elon Musk moves to buy the social media platform. The fallout over the very public saga has been the dramatic slump in TSLA stock. Among the issues Tesla investors fret about are the impact of Musk unloading Tesla shares to fund his acquisition, and the potential that the Twitter deal is distracting Musk from running Tesla. In response, Musk has tweeted that he is spending less than 5% of his time on the Twitter acquisition.

Whatever happens here, the direct impact on TSLA stock will eventually become a non-issue.

Good News From China: EV Buyers Are Shrugging Off Price Hikes

China has been the source of much bad news for Tesla in recent weeks. The Covid-19 lockdowns in Shanghai had a serious impact on the company’s EV production. However, those lockdowns — and the ripple effect of losing weeks of production — will also be short-lived.

There has been some recent good news out of China as well. Several Chinese EV makers have been reporting that despite price hikes because of rising commodity costs (especially the materials used to make batteries), demand remains strong. The Covid-19 lockdowns and price hikes have apparently not affected the ability for consumers of means in that country to buy EVs.

It is likely that Tesla will be seeing the same strong demand for its EVs in the Chinese market. The production blip (and corresponding drop in deliveries) will turn into a return to strong sales for the company.

Bottom Line: Should You Buy TSLA Stock?

Tesla stock still earns an “A” rating in Portfolio Grader. That’s a strong indictor that you can expect this stock to reward you with growth over the long term. 

Keep in mind that the Daiwa Capital analysts reiterated his “outperform” rating on the stock. He’s not backing off on recommending it. Checking in with the investment analysts polled by the Wall Street Journal shows a similar pattern. The consensus rating for TSLA stock is “overweight” with an average $995.28 price target. That might not be quite as optimistic as it was a few months ago, but it’s still more than 50% upside from the current price. And despite the short-term challenges, the company is experiencing a shift back into growth.

There is no guarantee that TSLA shares won’t fall further in 2022. In fact, continued short-term turbulence is a given when you consider the challenges of Covid-19 lockdowns in China and the continuation of Elon Musk’s Twitter acquisition. However, for investors willing to wait out the volatility, the long-term growth prospects for Tesla remain solid, as do the expected returns for TSLA stock. 

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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