In a world in which Elon Musk found himself with increasingly fewer friends, one thing was certain: Morgan Stanley analyst Adam Jonas, always eager for that lead left spot in the next Tesla convertible, would stick with Tesla and Musk through thick and thin, no matter what.
Well, that ended this morning when Jonas appears to have had enough, slashing his price target on the car maker from $376 to $291, stating that following 1Q18 results, he is making significant cuts to his near-term and long-term auto margin forecasts, while forecasting greater equity dilution, i.e. another stock offering. Jones now sees “Tesla as trading near fair value with a balanced risk-reward.”
Jonas starts by commenting on the now legendary – and bizarre – Tesla Q1 conference call, saying that “regarding the feedback from the 1Q18 conference call… Elon Musk reserves the right to do very difficult things that could yield great commercial value long term. At the same time, investors reserve the right to understand the costs and the risks near term.”
Nonetheless, Jonas appears ready to brush aside the public outcry following the call saying that “we believe any impact on the investor engagement side is fairly limited and the market will focus on more pertinent and quantifiable debates such as the interplay between cash consumption and capital raising.”
He does, however, focus on the “recent increase in the pace of management departures and an apparent reorganization of the business suggest to us the need to address some of the technical and fundamental hurdles weighing on company margins.”
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