Tesla stock has more downside, and investors could see a 25% drop in future earnings, Loup’s Gene Munster said.
Munster is bullish long-term, and he believes shares are undervalued after a brutal 2022 sell-off.
“I remain positive on this company. I think ultimately there are a few good reasons to own this in 2023,” he told CNBC.
Tesla stock has more downside ahead, and investors should brace for as much as a 25% drop in future earnings amid recent price cuts, according to Loup Ventures’ Gene Munster.
“I am a long-term believer in Tesla. I think that the shares are undervalued. Near-term, I would be cautious. I think that there’s going to be some earnings pressure based on some of the discounting that has happened,” Munster said in an interview on CNBC on Tuesday.
That comes shortly after Tesla announced it had missed its production and delivery targets in the fourth quarter, causing shares to fall another 4% in early January. Shares of the car maker had a historically bad year in 2022 amid a wider sell-off in high growth stocks and investors’ growing concern over Elon Musk’s focus on Twitter, which he acquired in October. The company’s stock shed $700 billion in market value last year.
Last week, the company slashed its prices in China by around 13%. Munster told investors to expect a 25% cut to Tesla’s earnings in March, as he expected more earnings discounts to come. That echoes the view of other Tesla analysts, who have warned that the stock likely won’t rebound until at least after it releases its fourth quarter earnings at the end of this month.
“There is this bias when a stock is down as much as Tesla just to want to own it,” Munster said. “We want to own it in our funds. We don’t own it yet because we want to optimize that opportunity.’
Munster has been particularly critical of Musk, as the CEO has damaged Tesla’s brand through his chaotic takeover of Twitter. Musk stepping down as Twitter CEO could be bullish for Tesla stock, Munster previously said, adding that he was bullish on the EV maker over the long-term.
“I remain positive on this company. I think ultimately there are a few good reasons to own this in 2023. But I think that we could see more pressure in the near-term,” he warned.
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