Tesla is facing a 'code red situation,' says analyst who slashed his price target for the 4th time this year

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Tesla is facing a 'code red situation,' says analyst who slashed his price target for the 4th time this year

elon musk

Lucy Nicholson / Reuters

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  • Tesla shares fell early Monday after an analyst cut his price target on the stock in a report that followed a session of heavy selling Friday.
  • The Wedbush analyst pointed to a host of concerns around the electric-car maker, including an email that CEO Elon Musk sent to employees last week detailing cost-cutting measures.
  • Investors dumped the stock late last week after the National Transportation Safety Board said Tesla's Autopilot feature was engaged during a fatal crash involving a Model 3 in March.
  • Watch Tesla trade live.

Tesla shares fell early Monday after an analyst cut his price target in a searing report, drawing on a host of issues the electric car-maker is facing.

"We continue to have major concerns around the trajectory of Tesla's growth prospects and underlying demand on Model 3 in the US over the coming quarters," Wedbush analyst Dan Ives said in a note to clients late Sunday.

He added that 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."

Tesla shares fell by as much as 5.2% early Monday, and were on track to open at their lowest level since December 2016. Ives cut his target to $230 from $275 a share, meaning he's still betting on a 15% rally from here. Less than a month ago, he had a $365 price target, making him one of the most bullish analysts on Wall Street.

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He and a cadre of other Wall Street analysts have drastically tempered their view of the stock in recent months as growth, profitability, and demand concerns have weighed heavily on Tesla.

Read more: Tesla analyst slashes his target again, and says everything you think you know about it is in question

Though Ives saw Tesla's announced capital raise earlier this month as a "smart strategic step forward," he's increasingly concerned over the company's "cash crunch" while building out its Shanghai factory and attempting to ramp Model 3 production.

And the revelation that Musk is urging employees to be cost-conscious with their company expenses - per an internal email leaked to the news media and confirmed by Business Insider - does not exactly inspire confidence, Ives said.

Read more: Elon Musk says in email to employees that new cost-cutting measures are the 'only way for Tesla to become financially sustainable'

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He added the firm has "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."

The report followed a session of heavy selling Friday.

Tesla shares closed the day down 7.6% after the National Transportation Safety Board said in a preliminary report that Tesla's Autopilot feature was engaged during a fatal crash involving a Model 3 in March.

Tesla was down 37% this year through Friday's market close.

Now read more coverage from Markets Insider and Business Insider:

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