After seeing a 5% drop when markets opened, Tesla stock (NASDAQ:TSLA) exhibited some resiliency on Monday’s early trading, at one point hitting $307.76 per share in contrast to a low of $288.20. Tesla’s 5% drop appears to have been fueled partly by a note from JP Morgan analyst Ryan Brinkman, who cut his December price target for the company from $308 to $195.
Brinkman had maintained a $195 price target for Tesla before Elon Musk’s announcement last August 7, when he stated that was considering taking the company private. A day after Musk posted the tweet, Brinkman explained to JP Morgan’s clients that he opted to raise Tesla’s price target to $308, factoring in a 50% probability that the privatization would go through. Amidst the controversy surrounding Musk’s announcement, and after the CEO published a blog post explaining his rationale behind his tweet, the JP Morgan analyst noted that the funding for Tesla’s privatization does not seem to be secured at all.
“Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal. (Mr.) Musk, after saying that the Saudi Arabian sovereign wealth fund had expressed support for such a deal, had then said the Saudis were seeking additional information, including on how a going-private transaction would be structured, suggesting a deal is potentially far from even being formally proposed, which is different from our understanding on August 8 which was based on Mr. Musk’s statement on Twitter that, (the) ‘only reason why this is not certain is that it’s contingent on a shareholder vote,’” the JP Morgan analyst noted.
While JP Morgan has adopted a critical stance on Tesla, Oppenheimer & Co Inc senior analyst Colin Rusch maintained a more optimistic outlook on the company, stating that Tesla’s fundamentals are starting to get better. Rusch noted in a recent segment of Bloomberg Markets: The Open that Tesla would likely see a $300-$500 million contribution from the Model 3 alone this quarter.
“They’ve got an interesting model where they get paid right away but then have terms from their suppliers, so they actually generate positive working capital, and we think they could generate $300 to $500 million just from the Model 3 in the third quarter based on the guidance. As we go through these legal proceedings and this take private mess, which we think will take a fair amount of time. Whatever’s happening with the SEC and the communication is gonna take a while to get settled, but once we get through that, we think that the fundamentals of the company actually look pretty positive. The fundamentals are starting to look very sound to us, on this company, and we think that we actually support the stock if it really starts to take center stage,” the analyst said.
Tesla’s Model 3 ramp is showing some encouraging signs this month, with the company passing the 100,000-vehicle mark with its VIN registrations for the vehicle this past weekend. Analysts from Evercore ISI also noted after an extensive tour of the Fremont factory that the company would be capable of producing as many as 8,000 Model 3 per week in the near future.
As of writing, Tesla stock is trading down 2.05% at $299.23 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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Thanks for not joining the FUD bandwagon like some of Teslarati’s competing sites like Electrek. The click bait articles that Fred Lambert is spewing out are getting just as annoying as those from mainstream media.
Yup, Mr. Fred has decided to shadow block me and others. Suppliers are now complaining they are not getting paid, so Tesla is looking at tapping the $500 million credit line they have to pay them off, yet they have the cash in the bank. The problem is that they can’t pay off the next big loan with stock unless it is over $358 ps. 16 suppliers have filed mechanic’s liens since October.
Per Gasparino on Fox Business, who seems to have a board member willing to share off the record, the board thinks the SEC are under pressure to bring a case to the table regarding the infamous «420» tweet. He says the lawyer fees will be over $30 mil per year, as they are expecting «a deluge of investor lawsuits, class actions», with a potential of «billions in potential lawsuits». He reports that Tesla is asking cap-ex suppliers for rebates from 9-20%.
I’m new here, I have been in and out of Tesla, learned a lot of good things about Tesla like the LOS satellites they are deploying for another generation of internet speed and capacity, as well as many good conversations about machine learning and AI.
EV dominance is inevitable from my perspective, and Tesla has had a good head start, but it appears they are fumbling the ball. EM’s tweet will go down as one of the most expensive in history.
