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The Clouds Are Getting Darker for Tesla (TSLA) Stock


There’s a famous superstition that bad things come in threes, but for Tesla (TSLA) stock, the hits just keep on coming.

Last Thursday, the National Transportation Safety Board (NTSB) released a report indicating that the Model 3 involved in the fatal March crash in Florida was on Autopilot mode at the time of the crash. The circumstances of this crash are similar to those around the Tesla vehicle crash in 2016. In response, Tesla said that the driver took his hands off the steering wheel after activating Autopilot, which was an improper use of the Autopilot feature. Investors reacted negatively to the report, pushing Tesla’s share price down 10% in the past two trading days.

Wedbush analyst Daniel Ives is definitely worried about Tesla’s growth prospects and underlying demand on Model 3 in the US over the coming quarters. As a result, the analyst cuts his price target on Tesla stock to $230 (from $275), while keeping his rating at Neutral (i.e. Hold).

Ives commented, “With an inexperienced CFO at the helm, micro management of expenses now a focus (e.g., Musk employee email/memo from last week per media reports), and demand issues a dark cloud over Fremont, we have continued concerns around Tesla’s ability to balance this “perfect storm” of softer demand and profitability concerns which will weigh on shares until Musk & Co. prove otherwise in terms of delivering solid results over the coming quarters. Additionally, 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. As such, we are lowering our price target from $275 to $230 to reflect our reduced confidence in the company’s ability to hit its 2019 unit demand guidance and thus concerns that profitability targets in 2H could be lofty and “at risk” where things stand today.”

All in all, most of Wall Street is growing impatient with this electric car giant, as TipRanks analytics demonstrate. Based on 27 analysts polled in the last 3 months, 8 reiterated a ‘buy’ rating on TSLA, while 7 maintained ‘hold’, and 12 issued ‘sell’. However, the 12-month average price target still stands tall at $274.59, which implies a 34% upside from where the stock is currently trading (See TSLA’s price targets and analyst ratings on TipRanks)

 

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