Tesla Stock is Oversold - Is Now the Time to Be Brave?

Key Points

• Tesla is down 55% from its December high, trading at 2020 price levels.
• Wedbush reiterated an Outperform rating with a $550 price target, implying a 150% upside.
• RSI at 20 suggests deeply oversold conditions, making a strong bounce highly likely.

Few stocks have been as divisive in recent months as Tesla Inc NASDAQ: TSLA. After surging to an all-time high in December on the back of CEO Elon Musk’s closeness with President Trump and renewed optimism around its longer-term growth prospects, shares have since crashed, shedding 55% in just three months. Tesla is now back to 2020 price levels, erasing years of gains despite still being dominant in the EV market.

The company’s most recent earnings report at the end of January did little to restore investor confidence. Tesla missed expectations on both revenue and earnings per share and, for the first time in its history, reported a decline in annual vehicle deliveries. That alone would have been enough to put pressure on the stock, but a worsening macroeconomic environment and a clear shift away from high-risk growth stocks have compounded the selloff.

Adding to the concerns, multiple reports from Europe and China suggest that Tesla may fail to hit its initial Q1 delivery forecast of 415,000 units. On Monday, UBS doubled down on those concerns, cutting its Q1 delivery estimate to 367,000, well below the 495,000 that Tesla reported in Q4. The stock responded by plunging 15% in a single session, marking its worst trading day in nearly five years.

Wall Street Still Sees Huge Upside for Tesla

Despite the downward spiral, not all analysts are turning their backs on Tesla. Wedbush Securities and Robert Baird have both reiterated their bullish stance on the stock in the past week, and the team at TD Cowen even upgraded Tesla from a Hold rating to a Buy rating.

Wedbush analyst Dan Ives acknowledged the challenges but believes investors will eventually look past the company’s recent struggles and Musk-related divisiveness. He sees Tesla at the start of one of the most significant innovation and technology cycles in its history, with the launch of a lower-cost, sub-$35,000 model expected this summer. This could be a game-changer for Tesla’s growth trajectory, helping drive pent-up EV demand and reaccelerate delivery numbers.

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Beyond that, Wedbush also pointed to Tesla’s aggressive push into autonomous driving, with unsupervised Full Self-Driving (FSD) expected to roll out in Austin this June. According to their valuation model, the autonomous division alone could be worth $1 trillion in the long run. And the best news for those of us on the sidelines? Wedbush’s $550 price target points to a targeted upside of almost 150%, a potential upside that might be just too good to ignore.

Is This the Bottom for Tesla?

From a technical standpoint, Tesla is flashing a potential buy signal for those of us who rely on technical indicators. The stock’s relative strength index (RSI) has sunk to 20, which is considered extremely oversold territory. Historically, a significant bounce has followed when Tesla’s RSI hit these levels. While this does not guarantee a full rebound, it suggests that the current selling pressure is unsustainable in the short term.

However, broader market sentiment remains a concern. If the overall selloff in stocks continues, Tesla could struggle to establish a firm bottom, even at these levels. Additionally, Elon Musk’s unpredictable behavior and ongoing controversies continue to add uncertainty, making it difficult to predict when investors will regain confidence.

Final Thoughts

Tesla has been caught in a perfect storm of weak earnings, slowing deliveries, and a broader market rotation out of high-risk growth stocks. Yet, despite the stock being down 55% from its high, many analysts remain bullish, with Wedbush forecasting an eventual turnaround and a potential 150% upside.

With an RSI of 20 signaling extreme oversold conditions, a sharp bounce could be in the cards. However, broader market trends and next month’s earnings will ultimately determine whether Tesla can regain its footing or if more downside is ahead. But for long-term investors who are willing to pinch their noses in the short term, this may still be one of the most attractive entry points in years.