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One of the biggest Tesla bears on Wall Street is sticking with his views as rising global recession risks place potential pressure on the EV maker’s top and bottom lines.

Citi’s Itay Michaeli maintained a sell rating on Tesla shares in a note out on Wednesday. Shares fell more than 2% in pre-market trading.

Tesla’s stock has been shrugging off the global economic concerns hammering markets, with shares of the EV maker up more than 20% in the last three months while the S&P 500 dropped nearly 5%.

The relative out-performance reflects optimism around new government legislation that will support the adoption of EVs in 2023 and beyond. Tesla’s strong execution in the first two quarters of the year has also improved investor sentiment on the stock, which took a slight hit in August amid a broader market pullback.

Michaeli thinks otherwise, however. Here are the details behind his call:

Price Target: $141.33 (reiterated)

Rating: Sell (reiterated)

Stock price movement assumed: -50%

Michaeli is marking down his third quarter production estimates on Tesla and highlights the potential for a disappointing fourth quarter from Tesla as economic pressures mount.

“We now estimate Q3 deliveries at 369.8k units (398.5k prior) largely reflecting the production ramp at Shanghai. Our estimated Q3 deliveries incorporate strong demand but also some cushion for timing-related production/delivery variances. Given a number of production ramps this quarter and heavy reliance on September volume, there could be greater variance than usual in the Q3 delivery numbers. With production continuing to ramp into Q4, our 2022 deliveries estimate is intact (~1.4 million) since we regard the Q3 delta (vs. our initial estimate) as largely timing related. That said, we view the macro situation (particularly in Europe) as posing some risk to Q4 numbers.”

Visitors look at a Tesla model during the 5th China International Industrial Design Expo in Wuhan International Expo Center on August 5,2022 in Wuhan, Hubei Province, China. (Photo by Getty Images)

Tesla shares continue to be overvalued, Michaeli argues.

“Our view is based on a risk/reward assessment, blending likely EV and AV/software outcomes. We currently believe that future bull case expectations appear too aggressive (Tesla selling ~20mln units by ~2030 & soon achieving L4 RoboTaxi leadership), based on key data points we’re tracking. We are constructive on Tesla’s strong EV position and particularly the company’s improved execution in recent years. However, we are more skeptical on the company’s FSD/AV approach, which we view as a critical input to the overall risk/reward assessment given our positive stance on the AV opportunity as a whole.”

Michaeli listed a few factors that may prompt an upgrade on Tesla’s stock.

“If we began seeing signs that demand is consistent with the current narrative.

If Tesla’s margin performance (ex. credits) experienced a meaningful and sustainable expansion, then that would be supportive of a lasting competitive advantage.

New product announcements related to Car of the Future (Model Y, etc).

Given the industry’s race for Car of the Future TAMs, the potential of partnering or even being acquired by a large Tech company looking to enter future TAMs that we believe exist in mobility services.

If remaining/recent legal investigations turn out more favorably.

If the impact from the above risks turns out to be greater than we anticipate, the shares could exceed our target price.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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