Experts are advising Tesla shareholders to prepare for volatility.
“If you’re investing in or holding Tesla stock, get ready for a turbulent experience,” remarked Autotrader analyst Michelle Krebs in a statement to CNNMoney.
The Securities and Exchange Commission has filed a lawsuit against Elon Musk, accusing him of making “false and misleading” claims to investors in a tweet on August 7, where he stated he had secured funding to take Tesla (TSLA) private at a price of $420 per share. The SEC claims that Musk did not actually have the funding arranged.
On Friday, Tesla’s stock plummeted 12%, falling to $270 per share.
As for the company’s future, Cowen analyst Jeff Osborne indicated that it now relies on the “board’s decision-making, and the next steps remain unclear.” The firm has lowered Tesla’s price target to $200 per share.
According to Osbourne’s estimates, Tesla must raise $2 billion in the fourth quarter to avert bankruptcy in 2019. He noted that this challenge is compounded by the uncertainty surrounding Musk’s future.
The firm criticized Tesla as a company that has “consistently over-promised and under-delivered.”
Barclays analyst Brian Johnson mentioned that there is a $130 “Musk premium” embedded in Tesla’s stock, which could vanish if he were to leave. Johnson explained that if a judge compels Musk to step down, investors will shift their focus back to Tesla’s value as a niche automaker, rather than as a potential disruptor of various industries under Musk’s leadership. He aptly titled his note to clients “Lawsuit Secured.”
Citigroup has downgraded Tesla’s stock to a “sell” rating, additionally reducing its price target to $225.
CNNMoney (New York) First published September 28, 2018: 9:48 AM ET
