Shares of Tesla (NASDAQ:TSLA) have not had a very happy start to the new year, plunging 12.2% in its first 2023 session of trade on the back of an underwhelming delivery report. Undoubtedly, Telsa is an electric vehicle pioneer with a lot to get excited about. The innovative technologies underneath the hood of the latest and greatest Tesla EVs don’t change the fact that it’s an auto stock in the face of an economic downturn.
The recent delivery fumble may be just the start as we learn more about how much discretionary demand stands to go offline at the hands of a coming recession. Down around 74% from its 2021 peak, Tesla stock is in free-fall mode, and its stock still doesn’t look cheap enough to warrant backing up the truck, given the macro risks and competitive pressures that lie ahead.
Despite the magnitude of Tesla stock’s crash, shares are still up more than 270% from their 2020 pandemic lows. Indeed, many hot performers of 2020 have already completed their round trips to such lows. If shares of Tesla are headed for the same fate, there’s still quite a bit of downside left in the tank.
There’s no telling how much deliveries could fade as we march into a recession. As rates continue to rise, Tesla may be re-valued as more of an auto stock than a tech stock. Even if Tesla’s impressive technologies warrant a tech multiple, valuing the company as a tech stock is unlikely to do it further favors from here as rates continue to surge.
Though Tesla will survive the onslaught, I’m neutral on the stock. I don’t see value here — just mounting risk.
Elon Musk’s Multi-Billion Dollar Cashout Proves Well-Timed
At this juncture, CEO Elon Musk looks pretty bright for having sold off a chunk of his Tesla shares through 2022. His latest round of selling saw him dump 22 million worth of Tesla stock for an estimated $3.5 billion.
Though he’s stated that he’s done with the share sales, questions linger as to how the man will balance running Tesla in its moment of pain with his new responsibilities at Twitter. The social media platform also has a lot of baggage.
For now, Twitter users have voted. They want a new top boss at the helm of the social-media firm. Whether Musk can find the right man for the job remains to be seen. Regardless, a shift of gears back to Tesla may not be enough to put an end to TSLA stock’s violent implosion.
Musk is urging his employees not to make too much of the vicious stock market moves. For Tesla stock investors, it’s hard not to be rattled as the massive gains evaporate.
Tesla is one of the so-called “cult stocks” that many Musk believers have likely doubled down on many times on the stock’s multi-year ascent. Musk fanatics will be tested over the next year as the storm of headwinds comes rolling in.
Analysts Remain Upbeat on Tesla Stock
Wall Street analysts still view Tesla stock as a great buy on the dip, with mostly Buy ratings and just two Sell ratings. Indeed, analysts may need to “lower the bar” on price targets and recommendations as the stock’s brutal decline continues in the first quarter of 2023.
At $112 and change, Tesla stock trades at a somewhat palatable 33.4 times trailing earnings and 23 times cash flow. That’s a historically cheap multiple to pay for Tesla. Still, the stock remains pricier than the auto industry average, which sports 21.7 times trailing earnings and 14.5 times cash flow multiples.
As Tesla succumbs to the forces dragging down the auto market, it may not be too far-fetched to see the stock’s multiple contract further. As auto rivals continue to electrify their rosters, it’s entirely possible that the “tech multiple” attached to Tesla could vanish until the firm can pull ahead with self-driving innovations.
At this point, I think Tesla may have a tougher time taking market share from rivals as auto demand continues to sink further.
What is the Price Target for TSLA Stock?
Turning to Wall Street, TSLA stock comes in as a Moderate Buy. Out of 31 analyst ratings, there are 19 Buys, 10 Holds, and two Sell recommendations.
The average Tesla price target is $257.96, implying upside potential of 127.7%. Analyst price targets range from a low of $85.00 per share to a high of $760.00 per share.
Takeaway: It Seems Too Early to Buy Tesla Stock
Tesla is still a great company with a stellar brand. That said, recession headwinds seem likely to overtake the firm’s ability to take market share in the auto space. Given the wide range of analyst price targets ($85-$760), I’d steer clear of the name until consensus targets are narrower.
