Tesla shares rise with Citi improve, Musk speaks of a brand new manufacturing unit in Asia

Tesla Inc. CEO Elon Musk attends the World Artificial Intelligence Conference (WAIC) on August 29, 2019 in Shanghai, China.

Aly Song | Reuters

Tesla Shares rose nearly 8% on Wednesday after hitting a 52-week low a day earlier. The rally followed an upgrade by analysts from Citi and a hint from Tesla CEO Elon Musk that South Korea is a top candidate for a new factory the company plans to build in Asia.

The recovery is a respite for Tesla investors, who have seen the value of their holdings fall by about half this year amid a broader market slump and a reallocation of risky assets.

“We believe the year-to-date pullback has offset the short-term risk/reward tradeoff,” Citi analysts wrote, upgrading their rating on the stock to neutral. “To get bullish from here, we’d like to gain additional confidence in the average selling price/auto gross margin bridge (including tracking near-term data points in China and Europe) and FSD progress.”

FSD refers to what the company calls its full self-driving capability. Tesla sells driver assistance systems, including the standard Autopilot installed in all of its new vehicles and a premium FSD option. In the US, Tesla’s FSD is currently $15,000 upfront or $199 per month on a subscription basis. The company doesn’t say what percentage of users choose this option or how many unsubscribe.

Musk has been promising Tesla investors and customers since 2016 that his company will be able to convert its cars into self-driving vehicles that can act as robotaxis. However, it has yet to be delivered. Drivers using Tesla’s Autopilot, Enhanced Autopilot, FSD and FSD Beta systems should be alert to the road ahead, with their hands on the wheel and ready to take over the driving task at all times.

Alongside the Citi note, Musk spoke to South Korean President Yoon Suk-yeol on Wednesday and expressed optimism that a new Tesla factory will eventually open in the Asian country.

The extended sell-off that preceded Wednesday’s rally comes as Musk’s attention was mostly focused on Twitter, which he acquired for $44 billion last month.

Some falls in Tesla shares followed massive stock sales by Musk as he partially liquidated to fund the Twitter deal. Earlier this month, Musk sold another $3.95 billion worth of Tesla stock, telling Twitter staff he was doing it to save the social media company.

Musk quickly implemented mass layoffs, firing executives and streamlining key platform functions. In response, many advertisers have indefinitely suspended spending on Twitter campaigns, and civil rights activists have called for more boycotts until Musk’s team proves it can handle hate speech and other harmful content on Twitter.

Some Tesla analysts and investors fear potential spillovers to the electric car company. Adam Jonas, an analyst at Morgan Stanley, wrote in a report on Wednesday that the Twitter situation could impact consumer demand for Tesla, as well as trade deals, government relations and “capital markets support.” The company still recommends buying Tesla shares and has a price target of $330.

The stock was trading at nearly $183 late afternoon on Wednesday.

Leo Koguan, one of the company’s largest single shareholders, and other investors have called for a massive share buyback by Tesla. In a petition shared on Change.org, Tesla bull and influencer Alexandra Merz said a quick buyback would allow Tesla “to capitalize on what is currently a very undervalued stock price” and “act before the 1% tax on share buybacks on June 1 . effective January , 2023.”

Musk has said he’s willing to buy back Tesla pending board approval. Last month, when announcing the company’s third-quarter results, Musk said Tesla is likely to make a “meaningful buyback” next year, potentially ranging from $5 billion to $10 billion.

CLOCK: Tesla upgraded by Citi