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Tesla Forecast Slammed by BOA Analyst

Feb. 26, 2015
In his recently-published research note, Bank of America Merrill Lynch’s John Lovallo says there are too many questions about the future, and says Tesla stock will take a nearly 70% dive.

Electric car maker Tesla (IW 500/384) came up short of forecasts in earnings and vehicle sales for 2014, but despite the misses, CEO Elon Musk and many analysts expect a turnaround in 2015.

One analyst though, Bank of America Merrill Lynch’s John Lovallo, isn’t as optimistic for a rosy future. In fact he’s predicting a huge crash for the company. In his recently-published research note, Lovallo says there are too many questions about the future, and says Tesla stock will take a nearly 70% dive.

The grim assessment is based on what Lovallo thinks are misleading and unattainable goals set by the company, and that demand isn’t what investors are being told it is. It’s that strategy he believes, will ultimately lead to a pullback in production leading down a “long road of challenging financial results and cash burn that lie ahead.”

Tesla says it will produce 55,000 vehicles in 2015, including a brand new model. Lovallo thinks the total will be much lower based on demand in the U.S. and China, a market that hasn’t produced the growth expected. However, some analysts say more time is needed to establish the company in China and other foreign markets.

In partial agreement with Lovallo, Business Insider’s Matthew DeBord notes, Tesla has gone from a company with stock prices topping out at $292 a share, to a “manufacturing company with a lot of ground to cross between where it is now and where it says its business will be in five or 10 years.”

For now investors appear to be sticking with Musk and his optimism for the future. Stock prices are still hovering at about $210, but well off 2014’s nearly $300 high.

In some positive Tesla news, Consumer Reports just named the Tesla S its top car for the second straight year.

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