Tesla Is a Once-in-a-Lifetime Opportunity. Why This Analyst Is Still a Bull.

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Tesla

stock tends to generate strong opinions—in both the bull and bear camps.

Bears have had the upper hand lately. Shares of

Tesla

(ticker: TSLA) have been hammered by the broader market selloff. Still, the stock has plenty of enthusiastic bulls.

One is CFRA analyst Garrett Nelson, who is calling Tesla a “generational investment opportunity” right now.

“We view Tesla as a company with the potential for industry disruption, market share gains, and long-term equity performance similar to companies like

Apple

and

Amazon

in the 2010s,” Nelson wrote. “The [selloff] has created an attractive entry point.”

That’s a strong statement.

Apple

(AAPL) returned more than 1,000% in the 2010s—about 27% a year on average.

Amazon.com

(AMZN) earned almost 1,500%, or about 33% a year. And Tesla earned 40% a year on average in the 2010s, starting from its 2010 IPO.

Nelson is right about the selloff: It has been brutal.

Teals shares are down about 33% this year. They have been hit on many fronts.—inflation, higher interest rates, China’s zero-Covid policy, and even CEO Elon Musk’s

Twitter

deal.

Briefly, one by one:

• Musk’s

  
  
  Twitter
  
  (TWTR) takeover attempt has dragged down Tesla about 36% since the billionaire proposed the deal in mid-April. The

  
  Nasdaq Composite
  is off about 23% over the same span.

• Covid-19 lockdowns in China have thrown Tesla’s second-quarter earnings and delivery numbers for a loop. Wall Street expected Tesla to delivery up to 350,000 units. The total is going to be closer to 250,000.

• Inflation has hit most automotive stocks, threatening profit margins through higher costs. Most auto makers, including Tesla, have increased prices several times this year, citing higher costs as the reason.

• Higher interest rates, used to fight inflation, reduce affordability and threaten new car demand. Most cars are purchased with financing.

“In our view, these factors have overshadowed several key positives in the Tesla story: exceptional operational and earnings execution, future production growth from the recent startup of the Austin and Berlin factories, dramatic balance sheet improvement, and an impressive pipeline of future products,” Nelson added.

Tesla is ramping up production at two new plants and Wall Street expects deliveries to hit about 2 million units next year, up from this year’s 1.4 million. Tesla’s next model, the Cybertruck, is due to hit roads next year, too. After that comes a new roadster, a semi, and—investors hope—a lower-priced EV.

That’s not to say that Tesla’s business doesn’t have some tailwinds that are offsetting some of the headwinds. Operating profit margin in the first quarter, for example, came in at 19%. Operating margins at

BMW

(

BMW
.
Germany) were about 11%.

Nelson’s CFRA rating is “positive” and his price target is $1,200 a share. That’s one of the more bullish views. Overall, Wall Street is split on Tesla stock. Just over half of the analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the

S&P 500
is 58%.

The average analyst price target is about $913, up roughly 25%. That price target is, essentially, where analysts see the stock a year from now.

If Tesla stock closed the decade with Apple- or Amazon-like returns of the 2010s, Investors would be sitting on a roughly $4,000 share.

That’s only a fun-with-numbers, pie-in-the-sky figure. Bulls can hope, though.

Write to Al Root at [email protected]