Tesla (NASDAQ: TSLA) stock has dipped 10% since Tuesday as volatility for several tech stocks has risen as the United States Presidential Election between Incumbent Donald Trump and Democratic Candidate Joe Biden approaches. However, some analysts see it as an opportunity to buy the electric automaker’s stock at a discount.
TSLA has been upgraded to a “Strong Buy” by analysts at CFRA Research, who see the stock’s dip in price as a potential buying opportunity for investors. Based on the upcoming election and Tesla’s potential inclusion into the S&P 500 index, CFRA’s Garrett Nelson believes the time to buy the stock is now.
Nelson maintained the firm’s 12-month price target for TSLA stock at $550, “implying a ’22 P/E of 95.7x. Our adjusted EPS estimates remain $2.30 for ’20, $3.50 for ’21, and $5.75 to ’22,” the analyst wrote. Acknowledging the 6% drop in price during Friday’s trading session, CFRA believes the rise in COVID-19 cases in California, which increases the potential for future lockdowns, could be the reason for the selloff from some shareholders.
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“We view the selloff as a buying opportunity and raise our view to ‘Strong Buy’ in light of two possible near-term catalysts,” Nelson wrote in a note to investors. “First, we believe TSLA will soon be added to the S&P 500 Index, which could prompt a wave of buying, noting the stock’s 20% drop the day after the September rebalancing was announced.”
Tesla was snubbed from the S&P 500 in early September, which sent the stock tumbling down to $330 from $496 in a matter of nine days. However, there is still a chance that the automaker could make the transition into the S&P in the future, and Nelson believes it could happen soon. The inclusion would likely help the stock rebound in value.
According to the note, the upcoming Presidential Election, which is set to take place on Tuesday, November 3rd, is also a benefit for Tesla. A Biden win is a 68% probability, according to PredictIt, a popular betting exchange. “In the event of a Biden victory on Tuesday, we think TSLA would be a big winner given his proposals would heavily subsidize electric vehicles and solar power,” Nelson said.
With Tesla stock feeling extra pressure as the polls open, it could be considered a potential buying opportunity for many investors. With the company coming off of its best-ever quarter in Q3, there is no lack of demand. Tesla is increasing production rates by introducing new facilities in China, Germany, and the United States to keep up with the growing need for its vehicles globally. However, depending on which way voters sway on Tuesday, the stock could see more swings in either direction, with both candidates offering distinct advantages and disadvantages for sustainable energy companies.
At the time of writing, TSLA shares were trading at $392.77, down 4.4%.
Disclaimer: Joey Klender is a TSLA Shareholder.