Tesla, Inc.
Struggling Car Maker? Tesla is the "Blackberry of the EV industry" and its valuation could implode as competition intensifies and it becomes clear to investors that it is a struggling car company, said GLJ Research analyst Gordon Johnson, repeating his thesis on the stock.
Blackberry, though was the pioneer of smartphones, went out of business as it failed to adapt to changing consumer preferences and competitors flooded the industry.
Johnson has a Sell rating on the stock and a $24.33 price target.
To support his argument, Johnson noted a Reuters report that said Tesla has doubled discounts on some Model 3 as well as on some Model Y and other cars held in inventory in the U.S. The promotional measure could have been precipitated by waning demand amid economic uncertainties, rising competition and the upcoming Model 3 refresh, he said.
Stock Ignores Bad News: The recent stock surge has come despite a spate of bad news in the past, including a lackluster Investor Day, inventory issues in the U.S./EU, moderating sales in China, concerning lead times and new price cuts, Johnson noted.
Tesla's stock strength, according to the analyst, is due to the $233.024 billion in liquidity the Treasury injected into the equity markets in May alone. The liquidity injection in the 30 days is equal to 25 years of Fed's balance sheet expansion, achieved through the working down of the Treasury General Account balance, and to a lesser extent AI euphoria, he added.
Johnson expects Treasury Secretary Janet Yellen to withdraw $600 billion to $900 billion from equity markets, now that the budget bill is on the cusp of being enacted.
"We believe TSLA's fundamentals may, shortly, come back into focus. And, as they do, with numerous problems mounting for the company, we expect the stock to resume its downward trend lower toward our PT by year-end," he said.
