The unprecedented king of self-driving cars and the pioneer of the eco-friendly automobile, Tesla, recently slumped after hitting record high levels. Last Tuesday, the company’s shares fell due to a new warning from an analyst that mentioned a massive flaw on the company’s current bullish state and that a hit on the profitability may be seen in the later months.
The global investment banking firm, Jefferies, have come out and took it into their clients note to warn about the impending dismay that they can possibly unveil with Tesla. The firm told its clients to stay away from Tesla’s shares due to uncertainties on its future performance.
According to the note provided by Jeffries to its client, "It is with a bit of a heavy heart that we initiate coverage of Tesla at underperform," and "Achievements to-date and vision are impressive, but we don't think Tesla's vertically integrated business model can be scaled up as profitably and quickly as consensus thinks and valuation multiples imply."
Jeffries’ analyst Philippe Houchois has written the report and also took his time to set a 12-month price target for Tesla shares which was expected to be at the $280 mark. He also noted that "doubts about Tesla's ability to generate 30+% gross [profit] margin required to support its vertically integrated business model in distribution/supercharging."
On a broader scale, he also explained that "Given capital intensity, we don't think DCF [discounted cash flow] can justify the current valuation, let alone upside “and” We appreciate the growth upside from a brand whose reach goes well beyond auto markets and that valuing Tesla today assumes some form of 'steady-state' that is unlikely to happen anytime soon."
The California-based company has been surging this year and has reported a total of 81% increase on a year-to-date with their shares and even beating the famous tech giants FANG. Houchois forecasts bring a conclusion that its shares are going to dip by as much as 27% to $280 per share in the upcoming 12 months or after a whole year.
Along with the grievous note, the message still contained ample warning and space for Tesla to prepare to and give Elon Musk a fair warning for the company’s future. The folks at Tesla didn’t respond on Jeffries’ note and its shares are currently down by a total of 2% in the premarket after the warning from the analyst.
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