Tesla upgraded to buy from UBS after 31% drop in share price

Tesla was upgraded to buy at UBS, believing the stock market slump provided an attractive entry point for a high-growth company.

Analyst Patrick Hummel kept his price target at $1,100 while improving the stock. TeslaTSLA,
+1.24%
shares, down 31% on the year, are up more than 3% in premarket trading.

Hummel said the operating outlook is stronger than ever, driven by a record backlog and the ramp-up of two new gigafactories. It cut its 2022 earnings per share target by 12%, to account for the Shanghai lockdown.

Ultimately, he says, Tesla’s vertical integration into semiconductors, software and batteries will result in superior growth and profitability in years to come. “Tesla can outpace its peers with a combination of internal cell capacity, its lead over global competitors in the use of LFP cells, and its high share of direct-source, lithium-first battery products,” said he declared.

Tesla’s announced plan to cut 10% of employees did not phase Hummel. “For a company that is growing this rapidly, there is always a risk of gaining too much leverage in general functions, and the weak macroeconomic outlook is a good reason to accelerate efficiency efforts, in our view,” said he declared.

Tesla shares suffered not only from the broader decline in tech stocks, but also from CEO Elon Musk’s pursuit of Twitter TWTR,
+2.25%,
using pledged Tesla shares to fund its bid. Musk is called a key man at risk.

“Elon Musk remains the key person at Tesla, with all the associated risks,” he notes dryly. “Actions, social media posts, etc. are highly unpredictable.”

Karen J. Nelson