Tesla Inc. (TSLA - Get Report) shares extended their decline to a sixth consecutive session Wednesday, losing 6% to close at $192.73 following yet another bearish note from Wall Street analysts as pressure piles on the clean-energy carmarker's plans to turn a profit from its flagship Model 3 sedan.
Citigroup analyst Itay Michaeli cut his price target on the group by nearly 20% to $191 per share, while maintain a sell rating, citing a "negatively skewed" risk/reward scenario in the company's near-term outlook linked to concerns over cash flow and customer demand. Michaeli said the group's recent capital increase of $2.7 billion gives the balance sheet cushion against a 2019 downturn, but stressed the company needs to address its significant cash burn rate.
"The recent capital raise was a positive step but won't necessarily get the balance sheet out of the woods if Tesla cannot achieve FCF targets. So the recent reported internal memo, which seemingly called into question prior guidance, didn't help the risk/reward calculus." Michaeli said. "The implications can be serious, since an automaker's balance sheet is always subject to the confidence "spiral" risk."
"Good or bad, we think it's important for the company to provide a more formal guidance update sooner than later," he added. "In the meantime, we'll look at our Model 3/Y tracker & future product/FSD rollouts for clearer demand signals in an important Q2."
Tesla shares fell to as low as $191.78 earlier in the session, their lowest intraday level since December 2016. All in all, the TSLA has lost some 33% in the quarter to date.
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Tesla has been hovering around the $200 mark this week, the lowest level since December 2016, amid a spate of reports that question the carmaker's ability to drive profits in the coming year.
Morgan Stanley analyst Adam Jonas lowered his "bear case" outcome for the stock price yesterday, a view based on a series of worst-case scenarios for Tesla, to $10 a share from a previous estimate of $97 amid increasing concern it could find itself trapped in a tech and trade war between Washington and Beijing. Jonas has a $230 price target, with a equal-weight rating, under the stock's base-case scenario.
Jonas argued that his estimate for Tesla sales in China, between 2020 and 2024, would generate around $9 billion in revenues. However, should officials in Beijing respond to the increasingly damaging trade war, and target Tesla with reprisal tariffs or restrictions, that figure could be sliced in half and carve more than $16.4 billion in market value from the Palo Alto, California-based company.
"Our revised case assumes Tesla misses our current Chinese volume forecast by roughly half, to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention," Jonas said. "We believe as Tesla's share price declines, the likelihood of the company potentially seeking alternatives from strategic/industrial/financial partners rises."
Earlier this week, Wedbush analyst Daniel Ives cut his price target on the clean-energy carmaker to $230 from $275, citing "major concerns" with respect to its growth prospects and domestic demand for the Model 3, calling the company's challenges a "code red situation" and describing its path to profitability as a "Kilimanjaro-like uphill climb".
Last week, Tesla founder and CEO Elon Musk told employees in an email that, effective immediately, he and the company's new CFO will personally review all expenses going forward in a "hardcore" attempt to cut costs following massive losses during the last quarter.