Elon Musk 2019

Tesla Loses a Fifth of Value, Obtains 'Niche' Status

Elon Musk's attempt to pivot to a "full robotaxi scenario" failed to spring excitement, says analyst Brian Johnson.

The blows keep coming for Tesla Inc., even as the shares have shed about a fifth of their value in the past month. The latest knock comes from Barclays analyst Brian Johnson, who said the company may be relegated to the status of a niche luxury carmaker.

The analyst dropped his price target on the stock on Thursday to $150 from $192, writing that demand for Tesla’s Model 3 has stagnated in the U.S. The company lacks a path to significant profitability from its auto business and its solar storage installations have declined sequentially over the past two quarters, Johnson said. And Chief Executive Elon Musk’s attempt to pivot to a “full robotaxi scenario” also failed to spring excitement around Tesla’s self-driving capabilities.

“We expect more investors to gravitate back to Tesla’s near-term fundamentals of demand, profitability and cash generation,” Johnson wrote in a note to clients, maintaining his underweight rating on the stock. The analyst said his model estimates most closely mimic a scenario where Tesla is a “niche luxury” carmaker, leading to a share price of $133.

Johnson’s new price target is one of the lowest on Wall Street, with only analysts at Cowen, Williams Research, Vertical Group and Churchill Research holding lower targets, according to Bloomberg data. The average of the four lowest targets implies a 54% downside from Wednesday’s closing price.

After a 43% rout in Tesla’s stock this year, triggered mainly by concerns around demand and liquidity, some have speculated the bubble has burst, and investors are more likely to focus more on profit, margins and sales rather than promises of an industry-leading robotaxi fleet. Tesla shares rose as much as 0.9% in New York on Thursday, but then pared gains to trade down 0.7%.

Yet some say this is just a rough phase and will soon pass. According to New Street Research’s Pierre Ferragu, who has a $530 target on Tesla, the company has captured about 15% of the premium car market in the U.S. in March and April and has “unprecedented pricing power.”

“The disconnect between sentiment and reality on Tesla is at its all-time high,” the analyst said, adding that while there were signs of strong demand, “things will still be rocky, with bumps in the road and delays.”

The blows keep coming for Tesla Inc., even as the shares have shed about a fifth of their value in the past month. The latest knock comes from Barclays analyst Brian Johnson, who said the company may be relegated to the status of a niche luxury carmaker.

The analyst dropped his price target on the stock on Thursday to $150 from $192, writing that demand for Tesla’s Model 3 has stagnated in the U.S. The company lacks a path to significant profitability from its auto business and its solar storage installations have declined sequentially over the past two quarters, Johnson said. And Chief Executive Elon Musk’s attempt to pivot to a “full robotaxi scenario” also failed to spring excitement around Tesla’s self-driving capabilities.

“We expect more investors to gravitate back to Tesla’s near-term fundamentals of demand, profitability and cash generation,” Johnson wrote in a note to clients, maintaining his underweight rating on the stock. The analyst said his model estimates most closely mimic a scenario where Tesla is a “niche luxury” carmaker, leading to a share price of $133.

Johnson’s new price target is one of the lowest on Wall Street, with only analysts at Cowen, Williams Research, Vertical Group and Churchill Research holding lower targets, according to Bloomberg data. The average of the four lowest targets implies a 54% downside from Wednesday’s closing price.

After a 43% rout in Tesla’s stock this year, triggered mainly by concerns around demand and liquidity, some have speculated the bubble has burst, and investors are more likely to focus more on profit, margins and sales rather than promises of an industry-leading robotaxi fleet. Tesla shares rose as much as 0.9% in New York on Thursday, but then pared gains to trade down 0.7%.

Yet some say this is just a rough phase and will soon pass. According to New Street Research’s Pierre Ferragu, who has a $530 target on Tesla, the company has captured about 15% of the premium car market in the U.S. in March and April and has “unprecedented pricing power.”

“The disconnect between sentiment and reality on Tesla is at its all-time high,” the analyst said, adding that while there were signs of strong demand, “things will still be rocky, with bumps in the road and delays.”

 

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish