Tesla
stock snapped its losing streak—big time. The market and Wall Street both helped.
Coming into Monday trading, shares of the EV leader had dropped for six consecutive days and 13 of the past 14. Shares were down almost 10% over the past six trading sessions and 17% over the past 14. A mix of a market slide, fears over electric vehicle pricing, and Chinese economic woes weighed on investor sentiment.
Coming into the week, the
Nasdaq Composite
was off about 7% over the past 14 trading days as bond yields rose. Citi analyst Jeff Chung counted 23 price cuts at other electric vehicle companies in China in the first couple of weeks of August. What’s more, China Evergrande’s bankruptcy filing this past week has stoked fears about the health of the Chinese economy. China is the largest market for new cars and new EVs.
Tesla
stock shook all that off Monday. Shares gained 7.3%, closing at $231.28, while the
S&P 500
and Nasdaq rose 0.7% and 1.6%, respectively.
One reason for the big bounce is Baird. Monday, the broker put out its list of “best ideas” following second quarter earnings. Analyst Ben Kallo put Tesla on the list. He acknowledges that price cuts will impact profit margins, but sees several catalysts coming in the coming months, including “Cybertruck launch, a wider-scale adoption of FSD [Full Self Driving Software], continued growth in the Energy business, expanding into new markets, and a possible AI Day.”
FSD is short for Full-Self Driving and is Tesla’s top-level driver assistance software. As FSD improves, with the help of AI training, more people are likely to buy it. FSD costs $15,000 or can be paid for via a monthly subscription.
As for Cybertruck, the pickup launched in 2019 is due to be delivered to customers any day now. It’s the first new model for the company since the Model Y was first shipped in 2020.
Tesla’s energy storage business has enjoyed strong momentum so far in 2023. The company has deployed 7.5 gigawatt-hours of battery storage in the first two quarters of 2023, up about 280% year over year.
Energy storage falls into the category of non-auto sales. Tesla’s non-auto business accounted for about 15% of total sales in the second quarter, up from about 14% in the second quarter of 2022.
Along with Tesla, Kallo named a few other best ideas including, lithium miner
Albemarle
(ALB), solar firms
Hannon Armstrong Sustainable Infrastructure Capital
(HASI) and
Sunnova Energy
(NOVA), biofuels player
Darling Ingredients
(DAR), and battery start-up
Fluence Energy
(FLNC).
He rates all the stocks Buy. His price target for Tesla is $300 a share. Targets for
Albemarle
and Fluence are $288 and $36, respectively. Targets for Hannon and Sunnova are both $44 a share. His Darling price target is $104.
Write to Al Root at [email protected]
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