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Investors Business Daily

Tesla Stock Rallies 58% YTD, Top Analyst Says Don't Sell Yet

A top analyst Monday raised his Tesla stock price target after a jury on Friday found Tesla CEO Elon Musk not liable Friday in a class action shareholder lawsuit over his 2018 "funding secured" tweets. TSLA shares advanced Monday.

Wedbush analyst Daniel Ives, a longtime Tesla bull, increased his Tesla stock price target to 225, up from 200 and about 18% above where shares ended Friday. Ives also maintained an "Outperform" rating on the shares. The decision to hike his price target comes as Tesla stock has gained 58% on the year and is in the midst of a 91% run since it hit Jan. 6 bear-market lows of 101.81.

"The macro remains uncertain and a recession could likely be on the doorstep, however Tesla is now positioned well with its price points with demand outstripping supply so far in 2023," Ives wrote.

Tesla stock gained 2.5% to 194.70 Monday during market trade. On Friday, TSLA shares edged up around 1% to 189.98.

The moves Monday come after a jury on Friday found Musk did not cost investors billions of dollars when he tweeted in August 2018 that he was considering taking Tesla private. Musk tweeted at the time he was "considering" taking Tesla private at 420 a share. The Tesla CEO added "funding secured." However, funding was not, in fact secured, but Musk's attorney argued in San Francisco federal court that, "in that moment he didn't think."

After the court decision, Musk tweeted "thank goodness, the wisdom of the people has prevailed!"

"I am  deeply appreciative of the jury's unanimous finding of innocence in the Tesla 420 take-private case," he wrote.

Tesla Stock Still Has Room To Run After Price Cuts

Ives wrote Monday that increased EV demand in China "is just starting to hit its stride and should be a tailwind in 1Q."

On Jan. 6, Tesla slashed prices for the Model 3 and Y in China, with the base Model 3 cut more than 13% to $33,570. The EV giant also cut prices in other Asian markets that day, with further cuts in Korea on Feb. 3.

"The price cuts on Model Y/3 have resulted in a clear demand driver for Tesla in this key China region and coupled with the "reopening" post lockdowns are having a meaningful impact for Tesla in the field over the last few weeks," Ives wrote.

The global EV giant sold 66,051 China-made vehicles in January, a 10.4% increase compared to a year ago and up 18.4% vs. December.

Musk told investors on Jan. 26 that Tesla saw "the strongest orders year-to-date than ever in our history" in January. Musk added that orders were coming in at "almost twice the rate of production."

Signaling expectations for increased demand, Tesla plans to produce an average of nearly 20,000 vehicles a week at its Shanghai plant in February and March, according to Reuters. The company expects monthly production to roughly reach September levels of 82,000 vehicles.

Tesla Stock: Model Prices Go Up After Cut

Tesla also announced in mid-January price cuts in the U.S. and Europe to make more models eligible for tax incentives of $7,500 under the Inflation Reduction Act (IRA).

The EV giant had cut U.S. Model 3 prices by 6%-14%, depending on the trim. Tesla cut a standard trim Model 3 RWD by $3,000 to $43,990. With the IRA tax credit applied to the vehicle, consumers that meet income limits would be paying $36,240.

Tesla dropped the Performance Model 3 trim by $9,000 to $53,990, getting under the initial $55,000 limit for tax credits. Meanwhile, Tesla slashed base Model Y prices by $13,000, or nearly 20%, to $52,990, also below the tax credit limit. The Performance variant for that vehicle was cut to $56,990, also down $13,000.

In addition, sports utility vehicles (SUVs) priced up to $80,000 also qualify for the $7,500 tax credit. However, on Friday, the U.S. Treasury Department revised vehicle classification definitions making more electric vehicles eligible for the tax credits.

Now, the Treasury will use Environmental Protection Agency fuel economy labeling standards. This expands the definition of SUVs to include more crossovers. That will allow vehicles, such as Tesla's Model Y, to qualify for earnings even when loaded with more options.

In response, on Saturday, Tesla raised U.S. Model Y prices by $1,000-$1,500, while dropping the base Model 3 by $500.

Ives added Tesla could make more "modest" price increases over the coming months.

Tesla Stock's Twitter 'Soap Opera' Over?

Ives said Monday Musk's Twitter ownership seems to be "moving into the background for Tesla's stock."

Since Musk bought Twitter for $44 billion in late October, 2022, the Wedbush analyst has been a harsh critic the Tesla CEO's focus on the social media platform.

Ives wrote Monday that as Twitter's financials appear to stabilize, it relieves investor concern Musk could sell more Tesla stock.

"This is an important dynamic that starts to remove this overhang from the Tesla story although it remains a wild card in the overall Musk ecosystem until a CEO of Twitter is officially named over the coming months," Ives said.

Musk on Sunday tweeted that "Twitter still has challenges, but is now trending to break-even if we keep at it."

"To be extra clear, Twitter is definitely not financially healthy yet, but is trending to be so," Musk said.

In December, 2022, Ives repeatedly expressed his concern with Musk, Twitter and its negative impact on Tesla stock. After Musk took over Twitter, analysts said the billionaire's tweets and the news cycle surrounding him was hurting Tesla investors. Musk has used Twitter to make political statements and interact with people across the political spectrum.

In late 2022, Ives called Musk's Twitter endeavor a "soap opera" and a "fiasco."

He added it caused "brand deterioration for Musk and Tesla." Ives ended up cutting  his Tesla stock price target to 175, from 250, in mid-December, 2022.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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