Former Tesla bull makes $10 worst-case call on shares of EV producer

By Reuters - Global Times Source:Global Times - Reuters Published: 2019/5/23 14:58:40

One of Tesla's former biggest supporters on Wall Street said on Tuesday the electric carmaker's shares could fall to $10 from nearly $200 now, if trade tensions with China escalate and sap demand for its cars.

Morgan Stanley analyst Adam Jonas forecast the shares could be worth $10 to $391, with a price target of $230, a wide range that underscores the confusion and risks about Tesla's future.

The company is facing signs of dragging demand as rivals step up electric efforts, as well as issues related to cash flow and manufacturing, its outlook in China and its eccentric, charismatic Chief Executive Officer, Elon Musk.

"Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals," wrote Jonas, rated a five-star analyst by Refinitiv for the accuracy of his forecasting on the company.

It is building a factory in China to produce its Model 3 electric vehicles in the world's largest auto market and to escape a rise in tariffs on cars imported from the US.

Another brokerage, Baird, cut its price target for the company to $340 from $400, saying concerns over demand, credibility and noise around the company have kept incremental buyers out of the market.

An early backer of Tesla, Jonas in 2011 set a price target of $70 on the stock when it was trading around $23, a year after its IPO at $17 apiece. In 2017, he said the Tesla Network alone, Musk's plan for a robotaxi fleet, was worth $76 a share.

His bear case doesn't ascribe any value to robocabs but if the plan works, Jonas, who was once criticized in a New York Times article for being a cheerleader for Tesla, has a bull-case price target of $391.

The market action follows hot on the heels of a $2.7 billion fundraising round by the company two weeks ago that was oversubscribed, but has done little to settle the nerves of holders of Tesla's debt.

Tesla is also among Wall Street's more heavily shorted stocks, with about one-fifth of its float on the line.

"FAANG stocks continue to dominate the list of most shorted US equities ... but Tesla has continued to hold the No.1 or No.2 spot since 2016," according to financial technology and analytics firm S3 Partners.

Of 31 analysts who cover the stock, 10 now recommend buying Tesla shares, nine are neutral and 12 recommend selling, according to Refinitiv Eikon data..

While cutting their price target, Baird analysts reiterated their outperform rating, saying Tesla was "positioned to outperform over the long run, as it increases profitability, generates free cash flow and ramps up production of innovating products".


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