Tesla stock earns upgrade to Buy on 'misguided pricing concerns'

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Tesla stock earns upgrade to Buy on 'misguided pricing concerns'
Credit: © Reuters.

By Senad Karaahmetovic

Despite seeing a “softer demand picture” in 2023 facing the global auto manufacturers, Berenberg upgraded Tesla (NASDAQ: TSLA ) stock to Buy from Hold.

While Tesla shares moved lower in the closing months of 2022 on several catalysts, including price cuts, Berenberg analysts said such moves are “an investment in growth.” Their new price target on Tesla stock stands at $200 per share.

“Tesla’s opportunistic post-pandemic price increases reached their limits through Q4 2022. Its rising production capacity into 2023 meant that Tesla was able to shift towards pricing its vehicles to drive volumes (sacrificing near-term margin), which positioned itself competitively against new EV launches. As Tesla’s Berlin and Austin plants ramp up, we expect production to replicate elements of Shanghai’s low-cost processes,” the analysts wrote in a client note.

Berenberg sees Tesla taking a market share at a gross margin that exceeds 25%. Moreover, the analysts are more positive about valuation after shares lost roughly 65% in 2022 while Tesla’s upcoming Investor Day (March 01) offers a “near-term catalyst potential.”

Elsewhere in the broker’s coverage of Auto OEMs (original equipment manufacturers), analysts downgraded General Motors (NYSE: GM ) to Hold to reflect “caution in the mass-market segments,” and BMW (ETR: BMWG ) to Hold following recent outperformance.

Tesla stock is down over 1% in pre-market Monday after closing 11% higher on Friday.

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