Tesla woes make it a 'restructuring story,' influential analyst says

An influential Wall Street analyst who had a price target as high as $379 on Tesla Inc. a little more than a year ago held a private call with investors Wednesday to elaborate on why he thinks the stock may now be headed for as low as $10.

“Tesla was seen as a growth story,” Morgan Stanley analyst Adam Jonas said on the call, a recording of which was obtained by Bloomberg News. “Today, supply exceeds demand, they are burning cash, nobody cares about the Model Y, they raise capital and there’s no strategic buy-in. Today, Tesla is not really seen as a growth story. It’s seen more as a distressed credit and restructuring story.”

Tesla shares extended a streak of declines to a sixth consecutive day, closing down 6 percent to $192.73, the lowest since December 2016. The shares began rising this morning after CEO Elon Musk predicted in an email that second-quarter deliveries would hit a new record. The stock rose 1.4 percent to close the day at $195.49.

Jonas, who rates the carmaker the equivalent of a hold, issued a report Tuesday saying that Tesla may have “over-saturated” the market for battery-electric sedans outside of China.

Representatives for Tesla and Morgan Stanley didn’t immediately respond to requests for comment on Jonas’ wide-ranging and nearly hour-long call. Morgan Stanley was among the underwriters for Tesla’s offerings of new common stock and convertible bonds earlier this month.

“At the heart of this is demand,” Jonas said of Tesla’s woes. “What is changed is demand. That is the first domino.”

‘Whisper number’

Tesla delivered 63,000 cars in the first three months of the year and told shareholders it expects to deliver 90,000 to 100,000 in the second quarter. Jonas said that the “whisper number” on Wall Street is for deliveries to reach the mid to upper 70,000-unit range.

Business Insider reported on the call earlier Wednesday.

Jonas is still bullish on Tesla’s technology -- from its software and ability to push over-the-air updates to consumers, to its hardware, recharging infrastructure and the volume of data it collects from drivers using Autopilot.

“Auto company executives describe Tesla as the white rabbit at the dog race,” Jonas said. “All the other companies know they are never going to catch the rabbit; they just hope they are the fastest dog. Tesla’s the white rabbit, but it’s attached to execution liabilities and real financial liabilities. What is the rabbit worth?”

Record quarterly deliveries?

Meanwhile, Tesla is on course to top its record for quarterly deliveries in the second quarter, beating the 90,700 it sent to customers in the final quarter of last year, according to an email Musk sent to his staff.

Musk's email, widely posted on social media and authenticated for Reuters by a source familiar with the matter, also said the company had on average produced 900 Model 3 cars per day this week, bringing it closer to a target of 7,000 per week.

Demand for the Model 3 sedan and Tesla's other cars has moved to the top of investors' list of concerns.

In the email sent late Wednesday, Musk also said the company had racked up over 50,000 net new orders this quarter as of Tuesday.