Ex-Tesla bull says stock ‘no longer investable’
Analyst slashes price target by US$100, citing CEO Musk’s ‘erratic behaviour’
Nomura Instinet analyst Romit Shah downgraded Tesla on Tuesday to neutral from buy in a note titled “No Longer Investable.”
The note to clients starts by pointing out that previously he’s been one of the biggest bulls on the Street since initiating coverage last October.
Shah slashed his price target on the company to US$300 from US$400, citing the “erratic behaviour of CEO Elon Musk.”
Among Shah’s concerns: The increasing number of Musk tweets per day, his cave diver accusations, his outbursts on an earnings call, his taunts of short sellers and his appearance on Joe Rogan’s podcast.
Shah continues to believe that Tesla can out-innovate the competition and that the company may eventually be much bigger than it is today, but says it’s better to remain on the sidelines until the company has better leadership. Tesla shares have lost over 20 per cent of their value since early August in the wake of Musk’s “funding secured” tweet.
Tesla fell by two per cent ending the day at US$279 in New York. The stock is pointing to a decline for September, hasn’t seen backto-back monthly gains since December and January, and is off almost 30 per cent since hitting the US$385 all-time high almost a year ago.
After Shah’s downgrade, bulls on the stock have become the minority with just nine analysts recommending buy, 11 saying hold and 12 rating it a sell, according to data compiled by Bloomberg.
The automaker leads the S&P 500 in sell recommendations from analysts.
However, the second highestranking executive at Musk’s rocket company Space Exploration Technologies Corp came to his defence Tuesday saying the mania over his antics was getting out of hand.
“Elon is a brilliant man,” Gwynne Shotwell, SpaceX’s president and chief operating officer, said after speaking at a satellite industry conference in Paris. “He is as lucid and capable as he has ever been. I wish people would not focus on triviality.”
Musk’s behaviour has spurred a volatile month for Tesla Inc., for which, like SpaceX, he serves as chairman and chief executive officer. The stock has sold off since he tweeted his way through a shortlived attempt to take the company private. He gave an emotional interview to the New York Times in which he spoke of exhaustion and drug use. Last week, he smoked marijuana on Rogan’s podcast that was streamed online.
There’s “no chance” that Musk’s conduct will impact SpaceX’s ability to win contracts, and there’s been “no impact at all” on the level of confidence in him on the part of the closely held company’s backers, Shotwell said.
“Look at the work that Elon’s companies do and focus on that. Not on what he does,” she said.
SpaceX probably will fly around 22 missions in 2018. Its workhorse Falcon 9 rocket reached orbit 18 times last year, more than any other launch vehicle in the world. And it’s planning a second flight of its massive Falcon Heavy rocket after generating headlines in February by sending Musk’s cherry red Tesla Roadster — with a spacesuit-wearing mannequin at the wheel — into orbit.
Musk tweeted late Monday night that the company would be eliminating two colour options in order to simplify its manufacturing operations.
Tesla fans can still choose solid black and “midnight silver metallic,” as well as pearl white, deep blue metallic and red.
A Tesla spokesman said dropping the paint colours was not an indication of any production problems. “We occasionally adjust pricing and available options to best reflect the value of our products and to streamline our manufacturing operations,” the company said inastatement.
The company last week also named as automotive president Jerome Guillen, who has a reputation as Tesla’s fixer with a good track record of working with Musk.
In a blog post dated Sept. 7, Musk said Tesla is about to build and deliver more than twice as many cars as it did last quarter, without specifying whether the company would accomplish this feat in the third or fourth quarter.
During the three months that ended in June, Tesla produced 53,339 vehicles and delivered 40,740.