Why Tesla stock popped today

A noted bear is becoming more bullish on the EV leader.

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A woman smiles as she powers up her electric car using a fast charger.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

The Tesla (NASDAQ: TSLA) share price jumped 7.8% on US markets on Wednesday amid analyst upgrades. 

So what

After shedding hundreds of millions of dollars in market value this year, Tesla's stock is now presenting investors with a more favorable risk-to-reward opportunity. So says Citigroup analyst Itay Michaeli, who upgraded his rating on the electric vehicle (EV) maker's shares from sell to neutral on Wednesday.

Michaeli noted that following the steep decline in its share price, Tesla's stock is now trading for about 30 times his earnings projections for this year -- a far more reasonable level, in his opinion.

Still, Michaeli warns that competition is intensifying in the EV arena. But he postulates that Tesla's competitive position could strengthen if the economy falls into a prolonged recession since a difficult economy would likely take a bigger toll on its smaller and less financially sound rivals.

All told, Michaeli boosted his share price forecast from $141.33 to $176, or roughly 4% lower than the stock's closing price on Wednesday. He did, however, say that improvements in Tesla's average vehicle selling price and gross margins would drive him to increase his valuation.

Now what

Morgan Stanley analyst Adam Jonas also thinks the sell-off in Tesla's shares is overdone. Jonas expects Tesla to be a prime beneficiary of the EV-focused incentives in the Inflation Reduction Act. He also noted that it is the only automaker that his firm covers that already earns a profit from its EV sales.

For these reasons, Jonas is far more bullish than Michaeli on Tesla's prospects. He has an overweight rating and a $330 price target on the stock. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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