Some investors were likely concerned with Elon Musk’s behavior recently, and at least one Wall Street analyst has had enough. Nomura analyst Romit Shah downgraded Tesla (TSLA) on Tuesday, knocking his rating from Buy to Hold, while slashing his price target to $300 (from $400), which implies a slight upside potential from current levels. (To see Shah’s stock picks, click here)
Shah commented, “We are worried that this [Musk] behavior is tainting the Tesla brand, which in terms of value is most important […] This is best expressed in the number of tweets per day, which increased to 15 per day since May from four per day during the prior 18 months. Mr. Musk’s behavior is well documented (taunting short sellers, NY Times interview, cave diver accusation, earnings call outburst, Joe Rogan podcast) and likely contributed to the onslaught of executive departures in recent months.”
“The only comparable to Tesla’s brand recognition is Apple, in our view. What Apple taught us is that, once brand recognition is established, consumer behavior can begin to deviate from traditional economics in ways that benefit the company immensely. With the launch of Model 3, we saw that consumers were willing to forego compelling alternatives despite extended wait times and a premium price point. That said, consumers are fickle and we suspect could become scared about buying a Tesla if they believe the company might not be around long term. […] Notwithstanding improving fundamentals, we believe that Tesla is in need of better leadership (an about face) and are moving to the sidelines until we see what happens with management,” the analyst continued.
Shah joins a cautious party out on Wall Street, considering TipRanks analytics showcase TSLA as a Hold. Out of 27 analysts polled in the last 3 months, 7 are bullish on Tesla stock, 11 remain sidelined, and 9 are bearish on the stock. With a potential upside of nearly 11%, the stock’s consensus target price stands at $320.87.