- Tesla shares fell early Tuesday after Morgan Stanley’s auto analysts adjusted their bear case for the stock.
- The analysts, led by the longtime Tesla watcher Adam Jonas, cut their worst-case-scenario target to $10 from $97.
- While the firm’s price target was held at $230, the extreme downside implies a 95% drop from current levels.
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A Morgan Stanley analyst once dubbed Tesla’s "cheerleader" has drastically lowered his worst-case scenario for the stock to just $10 from $97, citing underlying demand. Shares fell 1% Tuesday.
"The reduction in our bear case to $10 is driven primarily by our concerns around Chinese demand for Tesla products," a team led by Adam Jonas wrote in a note to clients.
"Our revised bear case assumes Tesla misses our current Chinese volume forecast by roughly half to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention."
While this target represents an extreme situation, and the firm’s base-case target remains $230 a share, it reflects Wall Street’s rapidly declining confidence in the electric-car maker as demand concerns persist.
Tesla analysts have scrambled to chop down their earnings outlooks in recent weeks, with Jonas lowering his base-case target four times this year.
From late March to late April, Tesla was among the stocks in Morgan Stanley’s broader coverage universe with the most negative month-over-month changes in consensus earnings expectations.
During that time, Tesla analysts lowered their earnings estimates for the next 12 months by 33%, with just three names seeing more severe cuts, according to a Monday report from the firm’s quantitative analysts.
It’s not only analysts tempering their views of the automaker. T. Rowe Price, once counted as Tesla’s largest institutional shareholder, reduced much of its stake in the first quarter, a regulatory filing showed last week.
It has been a particularly volatile time for Tesla’s stock.
Shares on Monday sliced below $200 for the first time since late 2016 after the Wedbush analyst Dan Ives lowered his price target in a searing research note. Ives has cut his price target four times this year.
That followed a brutal session Friday, when Tesla shares plunged 7.6% after the National Transportation Safety Board said in a preliminary report that Tesla’s Autopilot feature was engaged during a fatal March crash involving a Model 3 sedan.
"The departure of key executives, price discounting, and extraordinary cost-cutting efforts add to the narrative of a company facing real potential stress," Jonas wrote.
Tesla shares have fallen 38% this year.
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