- Jefferies cut its price target on Tesla to $1,050 from $1,250 on Thursday, seeing less upside in the electric vehicle maker’s shares.
- The investment bank said it was “witnessing an uncomfortable buildup of negative news” surrounding Tesla CEO Elon Musk.
- Tesla shares have lost more than 30% this year but gained ground in Thursday’s session.
Tesla’s price target was cut 16% at Jefferies on Thursday, citing heightened governance risks surrounding CEO Elon Musk as the reason he sees less upside potential for the electric vehicle maker’s shares.
“Long-standing fears of disruption from within have come true, raising Tesla’s risk profile as operational performance continues to set transformative new standards for performance and resource efficiency,” the company wrote. Jefferies analyst Philippe Houchois in a note to clients.
The investment bank lowered its price target to $1,050 from $1,250, but retained its buy rating on Tesla.
Tesla shares in Thursday’s session rose more than 6% to trade above $700. But the title has been knocked down by more than 30% in 2022.
“‘Enemy inside’ and ‘Tesla bigger than Musk’ is how we defined for years the risks associated with Tesla’s unconventional leadership and weak governance,” Houchois said. “It’s hard to isolate the factors driving the recent correction, from the Nasdaq to Twitter’s financial commitments and China’s lockdowns, but we’re clearly seeing an uncomfortable buildup of negative news ranging from ratings to polarizing political views. and ethical issues,” he wrote.
“His personality suggests that the resolution rests with him alone,” Houchois also wrote.
Tesla stock was hit in a sell-off in the
which pushed the Nasdaq Composite into a
Meanwhile, Musk has been working on a high-profile deal to buy social media app Twitter for $44 billion, but has suggested cutting his offer based on the number of bots on the platform. On Thursday, news emerged that Musk had invested an additional $6.25 billion of his own wealth to fund the deal.
Additionally, Musk told his 95 million Twitter followers last week he would switch to voting for the Republicans as the Democrats “have become the party of division and hatred”.
The following evening, Insider released a report based on documents that said SpaceX, the aerospace company Musk founded, paid a flight attendant $250,000 to settle a sexual misconduct complaint against Musk in 2018. Musk in a tweet said the attacks on him “should be seen through a political lens”. He did not refer to specific attacks.
The “low-filter” style of communication can be unsettling, Houchois said, “although we generally find it helpful as Mr. Musk freely shares his thoughts and the implications for Tesla, from raw material shortages to the challenges of manufacturing or future automation”.
Tesla has “exceptional fundamentals,” Houchois said. “Tesla is ready to continue generating [free cash flow] cash faster than it can build physical product and capacity, with cash that should be deployed in higher battery vertical integration and/or captive financing to support affordability,” he said. .
“The trillion-dollar question is how far Tesla can push model concentration and how many models are needed to bring global share to 5% or 15%,” the Jefferies analyst said.