Investor sentiment around Tesla TSLA has been thin on the ground in the weeks since the company reported weaker-than-expected earnings Oct. 18.
The stock price is now down about 16% from the $263 Tesla hit in the days before it reported results.
Though still up around 80% for the year, a decent portion of the gains the stock posted throughout the first half have been erased.
Related: Key investor highlights the start of a positive trend for Tesla's stock
The company missed Wall Street estimates for earnings and deliveries in the quarter, but many analysts say the stock's poor performance of late has largely to do with price cuts and narrower gross margins.
With the average price of a Tesla down about 25% for the year, the company's gross margin thinned to 17.9% in the quarter from 25.1% a year earlier.
Chief Executive Elon Musk did little to calm these fears during Tesla's post-earnings conference call. Instead he left the door open for more price cuts into 2024 while repeatedly referencing high interest rates and a challenging macroeconomic environment.
"I'm not saying things will be bad. I'm just saying they might be," Musk said. "Tesla is an incredibly capable ship. But if the macroeconomic conditions are stormy, even the best ship is still going to have tough times."
Saying that Tesla must focus on making its vehicles affordable for the average consumer, Musk said: "The interest rates have to come down. I don't want to be going top speed into uncertainty."
Analysts — including the bulls — largely responded by cutting their price targets for Tesla.
The recent drop in the stock, Morgan Stanley's Adam Jonas wrote in a Nov. 6 note, has "influenced investor sentiment, reinforcing the share price move."
Related: Why Elon Musk changed his Tesla tune between the second and third quarters
What Tesla can do to reverse the stock decline
To strengthen investor sentiment move the stock more positively, Jonas says, Tesla must achieve several things.
First, he said, Tesla has to stop missing earnings estimates; non-GAAP earnings per share, Jonas said, have fallen significantly over the past 12 months, a trend that needs to stop.
The company, Jonas said, must also expand beyond its existing models. The bar for the Cybertruck is low after Musk explained that it could take 18 months for the pickup truck to become profitable.
"We would not underestimate the impact of launch/ramp execution on sentiment," Jonas wrote.
But in line with his bull thesis for the company, Jonas would specifically like to see Tesla make progress in expanding its operations behind the confines of a traditional automaker.
Jonas is looking for evidence, over the next six to 12 months, that Tesla is moving toward less capital-intensive projects, including licensing and software, that "have relevance beyond the auto market."
"For Tesla to defend its current multiple ... the company must show a credible link to the [artificial-intelligence] theme through tangible products," Jonas said.
Jonas maintained an overweight rating for Tesla stock, with a price target of $380.
"While Tesla may have achieved its 'iPhone moment,' it has yet to reach the 'App Store moment,' which is critical to unlocking high-margin, high-multiple, highly recurring revenue," Jonas wrote.
This impression is shared by Wedbush's Dan Ives, whose bull thesis revolves around the monetization of software and services.
Tesla shares at last check were trading off less than 1% above $220.
Related: Here's why the Tesla bears are very wrong, according to Wedbush analyst Dan Ives
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