Tesla has been experiencing a slowdown in production amid COVID restrictions at its Shanghai Gigafactory. Meanwhile, racial discrimination issues and poor working conditions leading to a drop off the S&P 500 ESG Index and ongoing drama for Elon Musk on and with Twitter, has caused other headaches. Dan Ives, the managing director of equity research at Wedbush Securities, told Cheddar he is still bullish on Tesla overall but Wedbush has cut its price target on the stock. Ives also added that he sees a 60 percent chance Musk tries to walk away from the Twitter acquisition. "It's really been an epic disaster, the best way to put it the last few months, and I think that's something even though we're bullish and continue long term," he said. "This is one of my favorite ways to play EV In the near term. I mean there's definitely some clear headwinds, which is why we lowered our price target to a $1,000."

Closing Bell

Tesla China Headwinds Hard to Ignore but Dan Ives Still Bullish Long Term

Welcome back to closing bell on cheddar news everyone. Tesla troubles have been mounting in recent days. The electric automaker officially getting kicked out of the S and P. 500 E. S. G. Index on Wednesday through the company's low carbon strategy. Its response to investigations of vehicle malfunctions as well as recent allegations of racial discrimination and poor working conditions at Tesla's US factory. Well it comes as the company is recalling hundreds of thousands of vehicles and struggling to ramp up production at its crucial shanghai gigafactory. So joining me now is a friend of the show dan Ives, managing director of equity research at Wedbush Securities, dan. It's good to see you what is your biggest concern for Tesla. But the biggest concern is really china because china and that's the hearts and lungs of the Tessa growth story and both from production as well as the demand perspective the zero Covid issues. I mean it's really been an epic disaster the best way to put it the last few months and I think that's something even though we're bullish and continue long term. This is one of my favorite ways to play E. V. In the near term. I mean there's definitely some clear headwinds which is why we lowered our price target to 1000 A $1,000. The stock currently trading at $715 continues to be a volatile stock Dan. What's it gonna take to get that stock back up to that $1,000 threshold. Look a lot of it comes down to china. They need to get into the other side of this from a production as well as the demand perspective giga. Berlin is key as well as what we're seeing in august in terms of the global production as they flex their muscles because we go in 2000 and 23 24. I mean, this is gonna really, I'd say the margin story and growth is going to take another level. Uh, but ultimately in the near term, because you talked about, it's really been one thing after another has been a nightmare a few months. And of course the twitter circus show that's just cast another black eye from musk and, and related to the Tesla story in terms of what we've seen play out here. Is there any indication as to when china's zero tolerance policy on Covid will end because it's not just impacting Tesla, but the whole, entire global supply chain. I mean, look, I'm talking to people in the region, they've been in their apartments for 40 days. So, you know, when you're in your apartment for 40 days, I mean you're not focused on getting a car, you're focused on getting food or for your family for your pet. And you know, I think that's the issue, look, I think this and it's not just hassle this across the whole supply chain. I mean, this continues to be. I think the the biggest black cloud over the tech sector, we can talk about multiples inflation and everything that else having from macro perspective, but this is really front and center that that's really impacting across the board in all technology and automobile companies of course, has disproportionately impacted because of how important giga shanghai is. So that's the concern, right? Is when it comes to Tesla long term, it sounds like we don't have an indication as to when china zero tolerance policy will stop. Right? Look, I mean, that continues to really be a rubik's Cube situation on the other side of that. That's really the focus, right? I mean you're not playing the stock for the next month or two, but no doubt. I mean, in the near term, I mean this is really ripping a band aid off situation in terms of what deliveries could be for June and it's out of their control because ultimately demands outstripping supply by 30%. However, there right now caught in this sort of spiderweb situation that we're seeing in china, Okay, I do want to get your take on this pending twitter deal. I know you've been putting out odds as to whether or not you think Elon musk will actually buy twitter when it's all said and done. What are the odds of that happening today and the recent weakness that we see in Tesla stock. I mean, we can't forget right that Tesla Ceo musk did sell shares of his own company to try to fund this deal. Well that's part of the problem the leverage from the Tesla situation in terms of himself and more stock that's been overhang in terms of how it ultimately fund twitter Look right now 60% chance in the eyes of the street that he tries to walk away in terms of pay the billion dollar breakup. He obviously Twitter's board will fight that in court and now we'll get caught nothing probably in the legal circles for you know 12-18 months And then there's probably a 30 35% chance that he just tries to talk down, renegotiate a lower deal. And of course your Twitter, you know they're in a quagmire because if musk walks away there's no deal. This is stock that could trade sub 30 with of cross defeat bots, spam issues being you know a clear overhang on the stock but no doubt. I mean this has been a Ringling brothers and Barnum and Bailey circus. Um So other issues certainly on Tesla's plate as well here hundreds of thousands of vehicles recalled on top of that getting the boot yesterday from the E. S. G. S. And P. 500 index. How big are those factors in the recent decline that we've seen in Tesla shares? I think the Sgs more because that's something that I think that was a shock got a shock them too many because it comes down to that's probably viewed especially among E. S. G. Accounts in terms of investors want more E. S. G. Plays but I think it just shows, I mean this is going to continue to to to sort of go through some of these headwinds, they're going to have to prove themselves, they're in the penalty box and now they need to navigate it. But you need the pilot on the plane that's musk and that's why right now the distraction that we're seeing from twitter perception is reality and that's been a black eye for the story. Alright, dan Ives, managing director of equity research at Weather Securities, dan. Thank you.