Tesla remains a prominent beneficiary of the Inflation Reduction Act, but Bernstein believes the risk-reward for the stock is not attractive going forward. “We see the IRA law as a clear positive for Tesla,” said Toni Sacconaghi in a note to clients Wednesday. “That said, while we acknowledge TSLA’s innovation and financial success, we continue to struggle to justify the company’s valuation.” The bill, which aims to curb inflation and invest in climate projects, includes a tax credit worth up to $7,500 for buyers of new electric vehicles . As part of the bill, there are provisions related to the price of the car and where it’s manufactured. Plus a certain proportion of minerals used in the battery needs to come from the United States or its free trader partners. Sacconaghi views Tesla and original equipment manufacturers such as General Motors and Ford as key beneficiaries of the credit, with the Model Y and Semi truck among the best situated within Tesla’s portfolio. While shares of Tesla have toppled nearly 16% this year and more than 28% from their highs, Bernstein believes the stock price does not support a strong risk-reward going forward. “TSLA’s valuation is higher than all other major auto makers combined, and appears to imply huge volume AND industry leading profitability going forward, which is historically unprecedented,” Sacconaghi wrote. “We believe risk/reward at current levels is not attractive for longer-term investors.” The firm retained its $450 price target on Tesla, which implies that shares could plummet more than 49% from Tuesday’s close. — CNBC’s Michael Bloom contributed reporting
