Tesla shares likely to rebound after recent 30% decline, says Bernstein

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Bernstein said that the 30% drop in Tesla shares compared to Friday since CEO August Elon Musk's famous tweet was too dramatic. Musk's social media post has sparked controversy and inventory volatility due to questions about funding his proposal.

"We see the current fall in Tesla shares as analogous to the previous trading opportunities, which have tended to be below $ 300 per share … We believe that the confidence seems relatively favorable for the next few weeks", analysis Toni Sacconaghi said in a note to customers on Monday. "We now see the short-term risk reward for Tesla relatively biased upward, given the potential for the stock to return to the middle of its $ 270 to $ 370 range."

Tesla shares rose 8.5% on Monday. The stock closed at $ 263.24 on Friday.

Sacconaghi said that when Tesla's stock fell below the $ 300 level over the past 18 months, it was an "interesting short-term entry point" for investors.

He said the latest share decline reflected the potential risk of lawsuits, Musk's "increasingly uneven" behavior, increased competition from other automakers, and the increase in the number of executive departures. .

"However, it is not clear to us that this is a major problem for the stock," he said. "There has been little progressive news about Tesla's fundamentals … The company seems to be staying on track to meet its production targets for Model 3."

Despite its short-term optimism, Sacconaghi is still challenging Tesla's ability to maintain profitability for its Model 3 vehicle.

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"In the longer term, we remain neutral on Tesla, because we believe that it is unlikely that the stock will detach until investors get information on the profitability / normalized gross margin of the model 3. "said Sacconaghi. "We continue to see these two points as key interrogation points."

As a result, the analyst reiterated its market performance rating and price target of $ 325 for Tesla shares, representing a 23.5% increase over Friday's closing price.