Is Tesla (TSLA) Stock Set for a Turnaround?

Electric carmaker Tesla, Inc.'s. (TSLA) stock, which surpassed a trillion-dollar valuation this past year, has witnessed a reversal of sorts in 2022 amid a broader market sell-off in tech stocks. Even a stellar earnings report and record profits failed to revive its fortunes, the stock having fallen by more than 11% after the call.

However, analysts who issued bullish reports ahead of the company's earnings are predicting a turnaround for Tesla. As of this writing, the stock is trading at $913.99, up roughly 8% from its price at the day's start.

An Attractive Growth Story  

Dan Levy, analyst at Credit Suisse, upgraded Tesla stock to Outperform from Neutral in a note this morning, stating that the "pullback [in Tesla's stock price] creates an attractive entry point." From its peak of $1,199.55 on Jan. 3, 2022, the stock is down by roughly 24%, as of this writing. Levy acknowledged the recent downturn in growth stocks since the start of the year and said that Tesla had been "disproportionately" hurt by it. But he made the case that the stock will recover from its current slump.

"Tesla is a 1 of 1: we are hard-pressed to find a stock that checks all the boxes as Tesla does—attractive growth story (both top-line and EPS), disruption, decarbonization, etc.," he wrote, adding that "robust fundamentals" will help resuscitate Tesla shares. 

Tesla recently reported earnings that surpassed analyst expectations. It had earnings per share (EPS) of $2.54 (versus analyst estimates of $2.36) and record profits. The company delivered 936,000 electric vehicles, a new high, last year. Based on its latest earnings report, Tesla also has the best operating margin among electric vehicle (EV) manufacturers. "Strong margins are critical not only for [earnings per share], but also as we expect Tesla to eventually use its margin strength + software standardization to spur volume growth," Levy wrote in his note.

During the pandemic, Tesla also expanded its operations to include more manufacturing facilities in Austin and Berlin. The additions should help boost the company's output above its current goal of increasing output by 50% each year. During the company's earnings call on Jan. 26, Zachary Kirkhorn, chief financial officer at Tesla, said the target was "actually achievable with just our Fremont and Shanghai factories."

"With less question around demand and much more question around supply of EVs, Tesla should be a key beneficiary—it has a product lead vs. other and has taken the most holistic approach in EV supply. Not only does Tesla not have to tackle the challenges that legacy [original equipment manufacturers] must address (margin dilution, manufacturing transition, distribution), but Tesla also has leads in supply/vertical integration, software, product simplicity, and capital availability," Levy from Credit Suisse wrote. He has a price target of $1,025 for Tesla stock. 

Levy's price target trails even more bullish estimates for the electric carmaker's price from other analysts. For example, Wedbush Securities analyst Dan Ives, a long-time Tesla bull, has predicted a price of $1,400 for the company. "We're only in the second inning of what's going to be a $5 trillion green tidal wave … the stock's selling off here we just view it as an opportunity to own this more," he told Yahoo! Finance after the earnings call.