How low can it go? That’s what some investors are asking about Tesla (TSLA) stock.
Though there is still a large number of investors bullish on the stock, many on the extreme-bearish side are expressing concern that shares could fall to as little as $10 (currently trading a $196). For example, Morgan Stanley recently lowered its worst-case price target to $10, while Citigroup expects the stock to fall to $36.
Barclay’s analyst Brian Johnson is a bit less bearish than some others as he maintains his Underweight rating on TSLA stock with a $150 price target, which implies “only” 27% downside from current levels. (To watch Johnson’s track record, click here)
Tesla has had a rough year, as demand issues and financing challenges continue to plague the company that has yet to prove itself as a stable investment. Johnson says he saw this coming, pointing to his “red pill” view from 2007. There, he says, he outlined his ‘reality’ based view of why he disagreed with the optimistic dreams of Tesla admirers, and saw Tesla as overvalued.
Though Tesla continues to innovate and talk about the future, Johnson is concerned by is the lack of clear pathway to profitability, saying “in the US, the company still doesn’t have a path to significant auto profitability.” But Johnson believes that excitement around new products is also waning, and expects investors “to gravitate back to Tesla’s near-term fundamentals of demand, profitability, and cash generation,” which he believes are now more exposed.
Johnson is lowering his price target as he believes there is a “greater probability of a stall.” In his view, Tesla’s valuation is driven by “the probabilities around dream/’blue pill’ scenarios, which keep multiples highly elevated off the hopes of hyper growth,” but these dreams now seem “less likely.” While many investors have — and continue — to invest in Tesla for the long, long-term, citing the EV future and upcoming self-driving revolution, Johnson argues that this may never happen, given that Tesla can barely figure out how to operate in the present.
All in all, Wall Street’s sentiment echoes with a lot of negative reservation when it comes to the electric car giant’s stock. Based on 24 analysts polled by TipRanks in the last 3 months, 11 maintain a Sell rating, 6 issue a Hold, while 7 say Buy. However, the 12-month average price target stands at $264.50, marking a nearly 28% upside from where the stock is currently trading. (See TSLA’s price targets and analyst ratings on TipRanks)