Exclusive: Tesla Analyst Says Investors Need To Brace For More Wide Swings, Any Buyback Unlikely To Help Near-Term

Zinger Key Points
  • Tesla has to successfully develop and deliver Cybertruck and FSD if it has to meet lofty expectations, says Edward Jones' Jeff Windau.
  • The magnitude of stock repurchase Musk hinted during Q3 call suggests just 1-1.5% of outstanding shares, he says.

Tesla Inc. TSLA stock is trading at a two-year low and investors should be bracing for more wide swings, an analyst said.

Stock Priced In Significant Growth: Tesla stock has been under pressure due to concerns about Elon Musk’s loss of focus on his electric vehicle company and the need for him to sell more of his stake, Edward Jones analyst Jeff Windau said in an exclusive email interview with Benzinga.

The analyst said he isn't too worried about Musk’s divided attention as Tesla’s senior executive team has the experience to continue running the company on a daily basis. Musk will be needed to set strategic objectives, which is important for the EV maker’s long-term growth, he added.

While conceding that the China lockdowns will likely cause near-term volatility and fluctuations in manufacturing and vehicle deliveries, Windau said the company will navigate through the challenges. The analyst sees long-term growth opportunities remaining in the Chinese EV market for the company.

See Also: Tesla China Demand Not Budging? EV Maker Reportedly Mulls Another Price Cut As Order Intake Remains Anemic

“We believe the market is pricing in significant earnings growth over the next decade, which will require successful development and launch of products like cyber truck and full self-driving,” the analyst said.

Tesla shares, the analyst said, have recently been influenced by significant growth expectations against concerns of a “slowing global economy and increasing competition.”

“Changes to growth expectations can lead to wide swings in Tesla's stock price,” he added.

Buybacks May Not Mean Much: Given that Musk discussed the share repurchase during the third-quarter earnings call, the board appears to be giving it strong consideration, Windau said.

The analyst thinks the timing and actual magnitude of the purchases are difficult to predict, given considerations such as the economic outlook, expected growth/demand for Tesla vehicles, internal investment opportunities, dilution based on share sales and the share price.

Generally, share buybacks are a way to help the company reduce dilution, the analyst said.

“Given the amounts discussed by Elon Musk during the third quarter call, the purchase would be about 1% to 1.5% of shares outstanding,” he added. The analyst, therefore, does not anticipate a significant near-term impact for shareholders.

Price Action: Tesla shares were down 0.34% at $167.30 in premarket trading Tuesday, according to Benzinga Pro data.

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