Tesla Inc CEO Elon Musk attends the World Artificial Intelligence Conference (WAIC) in Shanghai, China on August 29, 2019.
Aly song | Reuters
Tesla shares jumped nearly 8% Wednesday after hitting a 52-week low the day before. The rally followed an update from analysts at Citi and an indication from Tesla CEO Elon Musk that South Korea is the best candidate for a new factory the company hopes to build in Asia.
The rebound is respite for Tesla investors, who have seen the value of their holdings fall by about half this year due to a broader market crash and a shift in risky assets.
“We believe the year-to-date pullback has balanced out short-term risk/reward,” Citi analysts wrote, bumping their rating on the stock to neutral. “To turn bullish from here, we’d like to gain more confidence on the auto average selling price/gross margin bridge (including tracking short-term data points in China and Europe) and FSD progress.”
FSD refers to what the company calls its full self-driving capability. Tesla sells driver assistance systems, including standard Autopilot, installed in all of its new cars, and a premium FSD option. In the US, Tesla’s FSD currently costs $12,000 upfront or $199 per month on subscription. The company doesn’t say what percentage of users choose that option or how many terminate their subscription.
Musk has promised Tesla investors and customers since 2016 that his company will be able to turn its cars into self-driving vehicles that can function as robotaxis. However, it has yet to be delivered. Drivers using Tesla’s Autopilot, Enhanced Autopilot, FSD and FSD Beta systems should remain alert to the road, hands on the wheel, ready to take on the driving duties at all times.
In addition to the Citi memo, Musk spoke with South Korea’s President Yoon Suk-yeol on Wednesday and expressed optimism about the opening of a new Tesla factory in the Asian country.
The extended sell-off that preceded Wednesday’s rally came as Musk’s attention largely turned to Twitter, which he acquired last month for $44 billion.
Some declines in Tesla stock followed massive stock sales by Musk as he liquidates in part to fund the Twitter deal. Earlier this month, Musk sold another $3.95 billion in Tesla stock, telling Twitter employees he was doing it to bail out the social media company.
Musk quickly rolled out mass layoffs, fired executives, and tweaked important platform features. In response, many advertisers have indefinitely suspended Twitter campaign spending, and civil rights activists have called for further boycotts until Musk’s team proves they can handle hate speech and other harmful content. on Twitter.
Some Tesla analysts and investors are concerned about the potential fallout for the electric car company. Morgan Stanley analyst Adam Jonas wrote in a report Wednesday that the Twitter plight could hurt consumer demand for Tesla, as well as trade deals, government relations and “capital markets support.” The company still recommends buying Tesla stock and has a price target of $330.
The stock traded at nearly $183 late Wednesday afternoon.
Leo Koguan, one of the company’s largest individual shareholders, and other investors have called for a massive share buyback by Tesla. In a petition shared on Change.org, Tesla bull and influencer Alexandra Merz said a quick buyback would allow Tesla to “benefit from a currently heavily devalued share price” and “act before the 1$ tax % on share repurchases become applicable on January 1, 2023.”
Musk has said he is willing to buy back Tesla, pending board approval. During the company’s third-quarter earnings call last month, Musk said Tesla will likely make a “significant buyback” next year, potentially between $5 billion and $10 billion.
LOOK: Tesla upgraded by Citi