Published: Fri, May 24, 2019
Markets | By Otis Pena

Tesla could crash to $10 in 'worst-case scenario'

Tesla could crash to $10 in 'worst-case scenario'

Even where the automaker appeared to pull off a coup, topping substantially what it had expected to raise with last month's combination of stock and debt offerings, Musk told employees in an e-mail, that the $2.7 billion Tesla brought in "actually only gives us about 10 months at the Q1 burn rate to achieve breakeven!"

On Monday Wedbush analyst Daniel Ives wrote in a client note that he has concerns about Tesla's growth prospects and underlying demand for the Model 3 during the coming quarters.

A Tesla Model 3 sedan, its first auto aimed at the mass market, is displayed during its launch in Hawthorne, California, U.S. March 31, 2016.

The analysts, led by longtime Tesla-watcher Adam Jonas, cut their worst-case scenario target to $10 from $97.

The latest of a round of critical notes from Wall Street analysts follows a dive in Tesla's stock and bonds on Monday, as investors anxious about its spending and problems with an Autopilot system that CEO Elon Musk has held out as key to the future of the Silicon Valley firm.

We believe Tesla may have over-saturated the retail market for BEV sedans outside of China. Financial services firm Baird also cut its Tesla estimates Tuesday, lowering the company's stock to $340 from $400, while T. Rowe Price, for years one of Tesla's biggest investors, sold around 81% of its holdings over the first three months of 2019.

Few automotive stocks have come close to riding the sort of rollercoaster that has become the Tesla norm.

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Wall Street seems to be piling onto the struggling stock.

Tesla analysts have scrambled to chop down their earnings outlooks in recent weeks, with Jonas himself lowering his base-case target four times this year.

By comparison, the average spread on corporate bonds rated "B" - roughly the same as "B-" rated Tesla - is 442 basis points, according to ICE BofAML bond index data.

The new worst case price would be a 95pc drop for Tesla's shares, which are now trading at around $205, although the bank maintained its main price target at around $230 and its best case scenario at $391.

Tesla's share prices now sits at $204.77 at the time of the writing of this article.

Now analysts are raising concerns in notes to Tesla investors, reports the Sydney Morning Herald. On the bullish side, he sees opportunity for Tesla shares to rise back up to $391, not far off from the brief high the stock hit after Musk announced his abortive plan to take Tesla private.

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