This isn't my call, but JP Morgan thinks Tesla's stock price will drop 40% by the end of the year. That's a drop when it's all said and done down to $180. They are concern with the valuation of the stock price, free cash flow, their ability to meet Model 3 production goals and increased competition.
Tesla has a "highly differentiated business model, appealing product portfolio, and leading-edge technology, which we believe are more than offset by above-average execution risk and valuation that seems to be pricing in a lot," analyst Ryan Brinkman said in a note to clients Friday.
Additionally, we worry about margin, given the potential for overtime, premium freight, and other expenses employed to ramp production in a seemingly inefficient manner.
Rumors circulated this past week that Tesla has run into a supply issue for the Model 3 due to their ramp up in production and less demand. Tesla has lots and lots full of Model 3 cars now. Tesla is the most shorted stock on the Market, so the shorts are having a ball over this news.
According to Needham & Co. analyst Rajvindra Gill, cancellations for Model 3 orders have picked up in recent weeks. Refunds now outpace deposits. A Tesla spokesperson denied that Model 3 cancellations exceed new orders.
With the volume of deliveries Tesla planned to handle with the Model 3, Elon discussed this issue with investors in early 2017.
The delivery of the cars is where the investment is needed. We need to deliver three or four times as many cars. But we don’t want to have three or four times as many delivery centers. How do we make that delivery process more streamlined, less paperwork, less bureaucracy and get people really ahead of time with really well-produced instruction videos for how to use their car. And well, of course, the best instruction is like not having instructions. And you will actually be able to play all of the instructions needed for your car on your car.”
If JP Morgan is right, price has to get through the monthly demand zone at $250 first. Price penetrated deep the zone in March, found buyers and nearly made all-time highs in June. Their target happens to be the level of the next monthly demand.
What do you think, will JP Morgan be right?
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas