Tesla stock could fall another 43% as key support level is breached and investors deal with 'Twitter circus show', Wall Street analysts say

• Tesla's drop to 17-month lows of Tuesday sets the stock up for more downside ahead, according to Fundstrat's Mark Newton.
• Newton sees the potential for a 43% decline to $109 per share, which would be an "extreme case."
• The potential decline comes as investors grow frustrated with Tesla CEO Elon Musk's share sales and new focus on Twitter.

Tesla's decline could continue into 2023 after the stock hit its lowest level since May 2021 on Tuesday, according to Fundstrat's technical strategist Mark Newton.

Newton said Tesla stock could fall to at least $165 per share, which represents potential downside of 14% from current levels. But in an "extreme case," the stock could fall to $109 per share, representing a decline of 43%.

"It's not based on fundamentals whatsoever, although we know the takeover of Twitter could cause some near term issues with regards to having too many irons in the fire potentially," Newton told CNBC's Scott Wapner on Tuesday.

On that note, much of the recent downside in Tesla does seem to be related to Musk's $44 billion acquisition of Twitter and his new focus on turning around the social media company. It was revealed that Musk sold about $4 billion of Tesla stock over the past few days to fund his Twitter deal.

"For Musk who multiple times over the past year has said he is 'done selling Tesla stock' yet again loses more credibility with investors and his loyalists in a boy who cried wolf moment. Musk is the most important part of the Tesla story by a wide margin and every move he makes has a major impact on Tesla stock," Wedbush analyst Dan Ives said in a Wednesday note.

Ives said the "Twitter circus show" has been a debacle since Musk acquired the company, given its swift 50% layoffs that were then followed up by the company attempting to bring back some of its recently fired employees, Musk's constant tweeting, and the "head scratching" roll-out of Twitter Blue's verification product.

"When does it end? The focus is Tesla or Twitter? Is this Twitter train wreck situation hurting/tarnishing the global brand of Musk and therefore Tesla?" Ives asked.

Newton is squarely focused on the technicals for Tesla, and he's specifically looking at its recent break below $200, to hit levels not seen in nearly 17 months.

"We're undercutting what I call the neckline of almost a 2-year head and shoulders pattern. These [patterns] still tend to be quite effective," Newton said, adding that his cycle analysis suggests the Tesla decline could happen in late December and between March and May of 2023.

"The downside for me is $165 to be safe, and an extreme case it could hit $109. Obviously a big decline, much bigger than many people would think possible given recent trading history. The stock has been abnormally weak over the last couple months. Momentum certainly rolling over. Now we are seeing the price really confirm this recent breakdown. This stock is certainly, in my view, something to be avoided in the short run," Newton concluded.