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Tesla Stock Rises After Citi Upgrades It, And Elon Musk Mentions A New Asian Factory

Tesla Stock Rises After Citi Upgrades It, And Elon Musk Mentions A New Asian Factory
Tesla stock rose nearly 8% on Wednesday after hitting a 52-week low the day before. The rally came after Citi analysts upgraded the stock and Tesla CEO Elon Musk indicated that South Korea is a top candidate for a new factory the company hopes to build in Asia.
The recovery is welcome news for Tesla investors, who have seen the value of their holdings fall by roughly half this year due to a broader market decline and a shift away from risky assets.
“We believe the year-to-date pullback has balanced out the near-term risk/reward,” Citi analysts wrote, raising their rating on the stock to neutral. “To become bullish from here, we’d like to gain added confidence on the average sale price/auto gross margin bridge (including tracking near-term datapoints in China and Europe) and FSD progress.”
FSD stands for the company's full self-driving capability. Tesla sells driver assistance systems, including the standard Autopilot found in all new Teslas, as well as a premium FSD option. Tesla's FSD currently costs $15,000 upfront or $199 per month on a subscription basis in the United States. The company does not specify how many users choose that option or how many cancel their subscription.
Musk has been promising Tesla investors and customers since 2016 that his company will be able to transform its vehicles into self-driving robotaxis. It has yet to deliver, however.
Drivers using Tesla's Autopilot, Enhanced Autopilot, FSD, and FSD Beta systems are expected to keep their eyes on the road and their hands on the steering wheel at all times, ready to take over the driving task.
In addition to the Citi note, Musk met with South Korean President Yoon Suk-yeol on Wednesday and expressed hope that a new Tesla factory will open in the Asian country.
The extended selloff that preceded Wednesday's rally occurred as Musk's focus shifted to Twitter, which he purchased last month for $44 billion.
Some Tesla stock drops followed massive stock sales by Musk, who is liquidating in part to fund the Twitter deal. Musk sold another $3.95 billion in Tesla shares earlier this month, telling Twitter employees that he was doing so to save the social media company.
Musk quickly implemented mass layoffs, fired executives, and tweaked critical platform features. As a result, many advertisers have suspended their spending on Twitter campaigns indefinitely, and civil rights activists have called for additional boycotts until Musk's team demonstrates its ability to manage hate speech and other harmful content on Twitter.
Some Tesla analysts and investors are concerned about the company's potential fallout.
Morgan Stanley analyst Adam Jonas wrote in a report on Wednesday that the Twitter situation could harm Tesla's consumer demand, commercial deals, government relations, and "capital markets support." The firm continues to recommend Tesla stock, with a $330 price target.
Leo Koguan, one of Tesla's largest individual shareholders, and other investors have asked the company for a massive stock buyback. In a petition, Tesla supporter and influencer Alexandra Merz stated that a quick buyback would allow Tesla to "benefit from a currently very undervalued stock price" and "act before the 1% tax on share buybacks becomes applicable on January 1, 2023."
Musk has stated that he is willing to conduct a Tesla stock buyback, subject to board approval. During the company's third-quarter earnings call last month, Musk stated that Tesla is likely to conduct a "meaningful buyback" next year, potentially between $5 billion and $10 billion.

Christopher J. Mitchell

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