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3 conditions Tesla stock must meet to stage recovery

3 conditions Tesla stock must meet to stage recovery

Electric vehicle (EV) giant Tesla (NASDAQ: TSLA) has navigated a challenging path over the past month, witnessing a staggering 20% plunge in its stock value. 

The precipitous decline finds its roots in a disheartening Q3 2023 report, revealing a substantial dip in Tesla’s profit margins. 

This revelation has reignited fervent debates on Wall Street, rekindling the perennial question of whether Tesla is a steadfast auto company or a tech behemoth in the making. 

Among those who had their say recently is Adam Jonas, a senior Morgan Stanley analyst, and a known Tesla bull

Morgan Stanley highlights 3 areas Tesla must address

In his note to clients released on November 6, Jonas outlined three key areas Tesla must address in order to get back to winning days in the stock market, according to an X post shared by investment adviser Gary Black, who himself is also bullish on Tesla’s prospects.

In particular, the EV leader must stop missing Wall Street consensus estimates, which is leading to “continued negative earnings revisions.”

Secondly, the automaker must carry out successful launches of its new vehicles, such as the much-anticipated Cybertruck. 

But most importantly, Jonas said it must show “demonstratable progress in evolving Tesla’s business model towards more software, licensing and services, and robotaxis.”

Adam Jonas on Tesla. Source: Gary Black

“Morgan Stanley sees Tesla’s auto dominance as peaking, meaning new initiatives around areas like autonomous driving, energy storage products, and non-automotive licensing become vital next growth drivers.”

– wrote Jonas.

On the other hand, if Tesla fails to acquire more stable, recurring software and services revenue, the bank’s analysts expect continued pressure on the carmaker’s valuations.

Tesla stock price analysis

At press time on Friday, November 10, shares of TSLA were standing at $209.98, down 5.46% in the past 24 hours.

TSLA 1-day price chart. Source: Finbold

The stock fell around 5.1% over the past week and roughly 20.35% across the month, pushing its market cap down to $658 billion.

The latest downswing on Friday came after a largely bearish coverage of Tesla stock by HSBC Global.

In its first coverage of the EV titan, HSBC issued a ‘reduce’ rating and a price target of $146, which is over 30% lower than its current price. 

Although there were some bullish points HSBC analysts offered on TSLA, the bank raised questions about whether the company’s current valuation is fair, given that many of its ambitious plans, such as robotaxis, full self-driving (FSD) system, and supercomputers are yet to be realized.

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