Analyst Cuts Tesla Price Target By 50%, Names Top Auto Stock Picks For 2023

Auto stock investors had a difficult year in 2022 as the industry suffered through supply chain disruptions and inventory unbalances.

On Monday, one analyst adjusted his coverage of several top auto industry stocks, cut his price target for Tesla Inc TSLA by more than 50% and named his top three auto stock picks for 2023.

The Analyst: Bank of America analyst John Murphy issued the following ratings changes for auto stocks under his coverage:

See Also: Tesla Spikes Higher But Can EV-Giant Negate This Long-Term Trend?

• Adient PLC ADNT upgraded from Neutral to Buy; price target raised from $41 to $52.
• Aptiv PLC APTV downgraded from Buy to Neutral; price target cut from $151 to $120.
• BorgWarner Inc. BWA downgraded from Buy to Neutral; price target cut from $78 to $50.
• KAR Auction Services Inc KAR downgraded from Buy to Underperform; price target cut from $23 to $17.
• Magna International Inc MGA downgraded from Buy to Neutral; price target cut from $102 to $72.

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The Thesis: In addition to the ratings changes, Murphy reiterated his Neutral rating for Tesla but cut his price target for the electric vehicle maker by 50.9% from $275 to $135. Murphy also reiterated Buy ratings for Ford Motor Company F and General Motors Company GM but reduced their price targets to $24 and $80, respectively.

Murphy said auto stock investors can expect difficult conditions to continue in 2023.

"Overall, we expect the volume environment will remain challenging in 2023 based on our expectation for only moderate improvement in the supply chain coupled with the difficult macro backdrop, higher rates and a potential recession," Murphy said.

Related Link: Tesla Short Sellers Earned $15.7B In Profits In 2022

Fortunately, a handful of top auto stocks are well-positioned to navigate the difficult environment in 2023, according to Murphy.

Ferrari NV RACE is Murphy's top automaker stock pick for 2023 thanks to its balanced strategy and reliable financial performance. In addition, Murphy named Lear Corp LEAR his top auto supplier stock and AutoNation Inc AN his top auto dealer stock pick for 2023.

Benzinga's Take: Tesla's outlook for the next several quarters is challenging to say the least. It's difficult to say at this point just how much pessimism is already priced into the stock. Even after Tesla's huge 2022 sell-off, the stock still trades at a huge premium valuation relative to Ford, GM and all other major automakers.