It’s a short and dramatic plunge for Tesla (TSLA). Today, the electric car maker’s shares tumbled nearly 14% after the SEC filed a civil suit against Elon Musk alleging securities fraud. The complaint alleges that Musk either knew or was reckless in not knowing that statements made about his go-private plans were false or misleading. The big question: Will the sell-off continue?
Needham’s top analyst Rajvindra Gill commented, “While not shocked by the SEC finding, we believe the implications of this civil lawsuit all but eliminate Mr. Musk’s credibility as a competent CEO and believe the shares will continue to decline. In our view, the rationale behind the current $52 billion market cap has always been transient, primarily based on an elusive firstmover advantage in EVs and autonomous driving, which is rapidly shrinking, and more importantly based on a brand name and cache, intimately linked with Mr. Musk. If Mr. Musk’s credibility is now in serious question, we believe the brand equity could suffer and affect consumer purchases.”
“If long-term investors believe that Mr. Musk’s vision might not be carried out because he is no longer CEO (the SEC is seeking to bar him from from serving as an officer or director of a U.S. public company), we could see a capitulation in the shares (i.e. extreme high volume and sharp declines). We remind investors that TSLA currently trades at a significant P/E multiple premium to that of “AI/Machine Learning” plays on estimated 2019 EPS (~2x AMZN / NFLX, 4x NVDA.),” Gill added.
As such, Gill reiterates an Underperform rating on Tesla shares, without providing a price target.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Rajvindra Gill has a yearly average return of 17.7% and a 59% success rate. Gill is ranked #129 out of 4878 analysts.
Net net, most of Wall Street is surveying the troubled electric giant from the sidelines, with TipRanks analytics demonstrating TSLA as a Hold. Based on 27 analysts polled in the last 3 months, 7 rate a Buy on Tesla stock, 10 issue a Hold, while other 10 recommend a Sell. The 12-month average price target stands at $317, marking a 20% upside from where the stock is currently trading. (See TSLA’s price targets and analyst ratings on TipRanks)