Wedbush lays out what needs to happen for Tesla shares to bottom

Tesla shares remained under heavy pressure yesterday as media reports cited an extended production shutdown in China for January could be in the cards, Wedbush analyst Daniel Ives tells investors in a research note. "With China the core linchpin to the Tesla bull thesis, worries are growing around what the softening demand picture looks like for 2023 given the dark macro clouds and increasing domestic EV competition," writes the analyst. Ives believes Tesla will likely miss reduced Street estimates for Q4 "with a softer trajectory" for 2023. He thinks the company’s Q4 delivery units are now likely in the 410,000 to 415,000 range, down from his prior 450,000 estimate and below Street "whisper numbers" in the 435,000 range. "The reality is that after a Cinderella story demand environment since 2018 Tesla is facing some serious macro and company specific EV competitive headwinds into 2023 that are starting to emerge both in the US and China," according to Ives. However, the analyst believes Tesla still has potentially $5-$6 of earnings per share power in 2023 and should still approach 40%-plus delivery growth in a "brutal" macro environment. He thinks that if CEO Elon Musk refocuses back on Tesla, stops selling stock, the board initiates a buyback, and 2023 guidance is set conservative on its Q4 call in January, "then this stock has bottomed in our opinion and works from here." Ives maintains an Outperform rating on Tesla with a $175 price target.