Tesla Bull Turns Bearish As Clouds Over Elon Musk Continue To Darken

by Chris White

One of Tesla’s chief supporters on Wall Street has taken a more bearish approach to the electric automaker as the company embarks on a major managerial shakeup following poor production numbers.

Morgan Stanley analyst Adam Jonas is tossing up warning flags concerning the business and production aspects of the Silicon Valley company. He slashed his price target due to troubles in the electric car maker’s production process for the wallet-friendly Model 3, which has experienced production delays.

“The challenges in ramping up Model 3 production reflect fundamental issues of vehicle design, manufacturing process and automation levels that can weigh against the profitability of the vehicle,” Jonas wrote Monday night in a note to clients.

Tesla’s headwinds are structural, he said, even as the company promised manufacturing problems for the Model 3 are but a blip and will soon recover.

Jonas, a one-time Tesla bull, has sobered on the company as of recent — he has held an equal-weight rating on the stock for almost a year. He cut his price target for the company by nearly 23 percent to $291, marking the first time Jonas has held a price target below $300 since January 2017.

The veteran Morgan Stanley analyst likely became a little more pessimistic about Tesla shortly after CEO Elon Musk issued an unusual earnings call May 3 that dismissed concerns about the company’s business problems. Jonas called the call “the most unusual call” he’d ever experienced.

Musk’s off-script musings could hurt Tesla’s ability to obtain cash from capital markets, Jonas told Bloomberg shortly after the call concluded. The Tesla CEO appeared to grow increasingly irritated with what he called “boneheaded” questions from media members who participated in the call.

Storm clouds have gathered over Tesla ever since the Model 3 went into production. Moody’s dropped Tesla’s credit rating in March and changed the company’s outlook to negative as the fledgling Model 3’s production dwindles while the automaker’s financial situation grows dim.

Tesla will need to raise more money in the near future to meet its cash needs, the credit rating agency claimed. Moody’s labeled the electric car marker a substantial risk for investors willing to dive headfirst into the auto market.

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