Electric car maker Tesla, Inc continues to see its stock (NASDAQ: TSLA) fall this week following an analyst’s decision to lower the price target for Tesla shares. Not only is the stock down 18% so far in just this month alone, but it’s fallen by about 42% year to date. More analysts are warning about TSLA’s downside risk. “Tesla’s stock is damaged,” explains Oppenheimer Chief Technical Analyst Ari Wald. He thinks there could be downside risk to Tesla’s stock to $180, or 8% below the current market price.
On Wednesday, Citigroup analyst Itay Michaeli lowered his 12 month price target for the auto maker’s stock price from $238 to $191. “The risk/reward still appears negatively skewed despite the recent capital raise and stock pullback, mainly on lingering demand/free cash flow concerns,” said Michaeli (via Barron’s).” And Michaeli isn’t alone. Also making headlines on Wednesday was Bank of America analyst John Murphy, who also reiterated his own Sell rating on the stock. The following day Tesla shares lost as much as 6% in the morning before bouncing back up by the end of the trading day.
Additionally Tesla’s dependence on China for future sales growth could be thwarted by the ongoing trade war between China and the U.S. Despite lower Model 3 deliveries, the management team at Tesla has maintained an optimistic tone about the rest of 2019. Tesla says it expects to operate in a cash flow positive manner during the current quarter and in the second half of the year while growing its deliveries 45% to 65% year over year. But many analysts are dubious about those claims and thinks the automaker is overly optimistic.
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Some of the more optimistic analysts covering TSLA have altered their opinions recently. For example, “Wedbush analyst Daniel Ives reiterated a neutral rating for Tesla stock over the weekend. But he also lowered his 12-month price target for the stock from $275 to $230. This is down significantly from the $440 price target and outperform rating he had for the stock last December. The analyst is unimpressed by Tesla’s recent efforts to build hype for its autonomous taxi service plans and other projects beyond the Model 3, worrying they are taking energy away from the company’s most important priorities. Ives explained, “With a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound.”
To make matters worse for Tesla, Consumer Reports warned this week that a recent update to Tesla’s Autopilot driver assistance software does not work well and could be unsafe for users who use the program. “It doesn’t appear to react to brake lights or turn signals, it can’t anticipate what other drivers will do, and as a result, you constantly have to be one step ahead of it,” Jake Fisher, Consumer Reports’ senior director of auto testing, said in a news release.
The stock may continue its medium term decline and meltdown like a defective electric car battery. It took a long time just for the company to break even, and nobody knows whether or not Tesla can make a consistent profit in the long run. It may be a very interesting company, but that doesn’t necessarily mean it’s a good long term investment. If you already hold this stock it may be a good idea to put a stop loss on your position. TSLA has already fallen below its 200 day average, and the next major support level is around $150.
This author does not have any shares in TSLA and does not plan to own any within 72 hours of this post.