Tesla stock (NASDAQ:TSLA) is showing its trademark volatility today, amidst a longtime bull’s more cautious stance and a surprisingly optimistic outlook from a longtime critic. Tesla shares opened at $279.68 on Tuesday’s trading, down 2.04% from Monday’s $285.50 close.
In a recent note on Tuesday, Nomura Instinet analyst Romit Shah downgraded Tesla from “Buy” to “Neutral” in a note to clients titled No Longer Investable. Shah stated in his note that he had been one of Tesla’s biggest bulls since starting his coverage of the company last October, but recent developments concerning Elon Musk have been less than encouraging, particularly regarding the CEO’s Twitter behavior.
“The issue though is the erratic behavior of CEO Elon Musk. During the second quarter, the switch seemingly flipped. This is best expressed in the number of tweets per day, which increased to 15 per day since May from four per day during the prior 18 months,” Shah wrote.
That being said, the Nomura Instinet analyst remains optimistic about the progress that Tesla as a company has accomplished with the Model 3 production ramp. Shah noted that Tesla could very well out-innovate the competition, and the company may eventually become much bigger than it is today, but it would be wise to remain on the sidelines until the electric car maker has better leadership.
“With the launch of the Model 3, we saw that consumers were willing to forego compelling alternatives despite extended wait times and a premium price point. Notwithstanding improving fundamentals, we believe that Tesla is in need of better leadership (an about-face) and are moving to the sidelines until we see what happens with management,” Shah wrote.
With his recent note, the Nomura Instinet analyst opted to cut Tesla’s price target from $400 to $300.
In what could only be described as a dash of irony, Tesla recently received an optimistic outlook from a longtime critic as well. In a note published on Monday, Bernstein analyst Toni Sacconaghi stated that TSLA shares would likely bounce back up after the company’s recent drops. Sacconaghi, who has been a vocal critic of Tesla in the past (he is also one of the two analysts that caught Elon Musk’s ire during the now-infamous Q1 2018 earnings call), stated that whenever the company’s shares dipped below $300, it became an “attractive” entry point for investors.
“We see the current dip in Tesla’s stock as analogous to prior trading opportunities, which have tended to arise when the stock falls below ~$300 per share. We think the setup in sentiment looks relatively favorable for the next few weeks. We now see the near-term risk-reward for Tesla as relatively skewed to the upside, given the potential for the stock to revert towards the middle of its $270 to $370 range,” the analyst wrote.
Sacconaghi also noted that behind the noise from the controversies surrounding Elon Musk, Tesla itself appears to be on track for its Model 3 goals this quarter.
“However, it is unclear to us that any of these are deal breakers for the stock. There has been little incremental news about Tesla’s fundamentals. The company appears to remain on track to meet its Model 3 production guidance,” Sacconaghi wrote.
With less than three weeks before the end of September, Tesla is now in full throttle as it attempts to reach its target of producing a total of 50,000-55,000 Model 3 this quarter. Elon Musk appears to be confident of the company’s chances this Q3, as revealed in a letter to employees shared in Tesla’s official blog last Friday. In the letter, Musk noted that Tesla is poised to have the “most amazing quarter” in its history, and it is about to build and deliver “more than twice as many cars” as it did in Q2 2018.
As of writing, Tesla shares are trading down 2.74% at $277.69 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
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