Wall Street analysts weigh on Tesla - one of S&P 500's biggest losers in 2022

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By Senad Karaahmetovic

Today will close the most difficult year for stock trades in 14 years. While being a stock market investor was challenging in 2022, remember that bond investors had one of the worst years in history.

The S&P 500 is down nearly 20% year-to-date (YTD) after Fed’s aggressive interest rate hikes weighed on swollen valuations. The energy sector is the biggest outperformer in 2022, capitalizing on high inflation and robust demand for commodities.

On the other hand, the tech sector has had a horrible year with Nasdaq (NASDAQ:NDAQ) down roughly 33% YTD. Even in such an environment, some of the biggest tech companies in the world - like Tesla (NASDAQ:TSLA), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN - managed to underperform Nasdaq by quite a margin.

Tesla’s horrible couple of months

Electric vehicle (EV) maker Tesla, in particular, is among the S&P 500's biggest losers this year. Tesla stock hit levels below $110 a share earlier this week, the lowest it traded since August 2020.

In less than 5 months since August, Tesla stock managed to lose two-thirds of its value. Valued at nearly $1 trillion in late August, Tesla stock is set to close 2022 with a market cap likely below $400B.

Since it was announced in early April that CEO Elon Musk started accumulating a stake in Twitter, Tesla stock dropped over 70%. Musk was forced to sell tens of billions worth of Tesla shares in less than 8 months to make sure his $44B Twitter acquisition will go through.

When one adds an extremely weak macro environment for high-growth stocks, a new COVID-19 outbreak in China, as well as emerging EV demand issues, it comes as no big surprise that a massive selloff in Tesla stock has been seen in recent months.

Wall Street reflects on stock selloff

Here are comments from several Wall Street research firms covering Tesla: 

Wedbush: “We remain long term bullish and Outperform on Tesla although Musk MUST start to change direction here otherwise this situation could get even uglier.”

Piper Sandler: “TSLA has been in a tailspin over the past few weeks with bearishly-inclined traders and/or tax-loss sellers pouncing on every bit of incrementally negative news… But we do NOT believe that Tesla's market share is suddenly succumbing to a wave of new competition, and we do NOT believe anything has changed with the long-term thesis.”

Morgan Stanley: “We believe Tesla may be in position to extend its lead vs. the EV competition in FY23 (both legacy and start-up) even before consideration of IRA (Inflation Reduction Act) benefits where Tesla also stands out as the biggest potential winner.”

Baird: “Gigafactories in Austin and Berlin should lift margins by an increasing amount q/q in 2023 as production ramps. We are encouraged by reports of production in Berlin reaching milestones of 3K vehicles per week and production targets of 75K in Q123… We continue to believe TSLA is the best positioned EV maker in both the near and long term.”

Deutsche Bank: “Beyond the quarter, we continue to expect challenging headlines around demand softening and associated price cuts, but think the company remains best positioned to weather the current macroeconomic conditions, leveraging price to support volume growth and various cost levers in place to protect margins.”

Heading into the final trading day in 2022, Tesla stock price is down over 2% in pre-market Friday.