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Wedbush analysts maintained an Outperform rating and $250 price target on Tesla (NASDAQ:TSLA) shares Wednesday but told investors the Twitter overhang remains.
Still, the analysts claim demand for Tesla is “holding firm,” and Q4 remains on track for units midway through the quarter.
“The Twitter circus show continues to go on with Musk laser-focused on turning around this troubled platform while creating controversy on a daily basis. The problem is while the PR Twilight Zone of Twitter happens for the world to see and advertisers remain at bay while the Musk wild card of content moderation is front and center, the perceived overhang of “key person risk” with Musk is a real overhang on Tesla’s stock and not abating,” wrote the analysts.
They explained there are three main factors to the overhang, such as fear of Musk selling more stock to fund Twitter’s red ink, brand deterioration of Musk associated with Tesla, and Musk’s attention for now all focused on Twitter instead of Tesla.
On demand, the analysts stated they believe Tesla is on track for the 430k to 450k range of units in 4Q and should be a sign of confidence for Tesla bulls navigating this Twitter overhang situation.
“However, in the near-term a lot of the worries surrounds Musk selling more Tesla stock to fund Twitter’s treasure chest and the ‘attention worries’ around key person risk with Musk is hard to ignore. In a nutshell, the Tesla transformation story over the next few years is still on track and nothing from our thesis has derailed heading into 2023. The Twitter overhang risk is truly what is weighing on Tesla shares here and Musk must reassure investors over the coming weeks/month that the Twitter soap opera will not interfere with the longer term Tesla growth story. We remain steadfastly bullish on the Tesla EV growth thesis over the next few years, but as discussed over the last few weeks recognize that until this Twitter dark cloud passes it will remain an overhang on TSLA,” the analysts concluded.