Tesla Inc (TSLA): Has the Street Lost Trust in Elon Musk?

Tesla Inc (NASDAQ: TSLA) shares are trending, but not for good reasons. First, bad news for the company came earlier this week after one of the company’s Model S sedans exploded in a Shanghai parking garage.

Later, Tesla stock was downgraded by investment firm Evercore ISI.

Evercore’s analyst Arndt Ellinghorst said in his note to investors that the biggest threat to Tesla remains the increasing competition in the market. Ellinghorst believes that the demand for Tesla cars will slow down amid competition.

Ellinghorst said that as “growth estimates are coming down, valuation multiples should trend lower.”

The analyst lowered the stock rating for Tesla to equivalent to a  “Sell” from a “Hold”. Ellinghorst also decreased his price target for Tesla stock to $240 from $330. On top of that, the analyst cut his delivery estimate for 2019 to 369,000 units from a previous 402,000.

Tesla CEO Elon Musk recently made big claims at the Tesla Autonomy Investor Day. One of these claims was the company’s plan to launch about one million robotaxis in the U.S. as early as 2020. Musk said that he is an optimist regarding robotaxis because of the amount of data his company is able to gather and the hardware which the company is using in its cars. But it seems the Wall Street has lost trust in Elon Musk due to his track record of missed claims. Elon Musk faced heat from the SEC after he claimed to have secured the funding to take Tesla private. Tesla’s Model X launch came in two years later than originally promised. Musk had promised a hands-free trip across the US by late 2017, but the company is still working on this technology.


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In a program on CNBC, Rajvindra Gill of Needham said that the self-driving technology provided by Tesla (L2 Advanced) is going to be offered by almost every major automotive player in the next 3-4 years, including Toyota. The analyst has an “Underperform” rating for Tesla Inc (NASDAQ: TSLA) stock. However, in the same program, Pierre Ferragu of New Street Research said that he is still bullish on Tesla. The analyst has a price target of $530 for the stock. The analyst said that Tesla’s new chip is almost 7 times better than any other offering in the market.

Cowen’s analyst Jeffrey Osborne also said in a note that Tesla’s robotaxi plan is “half baked” and there is a high level of execution risk involved in the company’s long-term goals.

The company will announce quarterly results on Wednesday, and the Street is expecting the company to report a loss of $1.84 a share. Given all the bearish outlooks and Tesla’s highly unpredictable trend, it’d be safer to avoid the stock for now.

The author does not have an investment in stock discussed in this article.


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