U.S. Markets closed

Tesla Woes Make It a ‘Restructuring Story,’ Morgan Stanley Says

Dana Hull
1 / 2
Tesla Woes Make It a ‘Restructuring Story,’ Morgan Stanley Says

(Bloomberg) -- A 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% to $192.73, the lowest since December 2016. Jonas, who rates the Elon Musk-led 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?”

(Updates with additional comments starting in the fifth paragraph.)

--With assistance from Felice Maranz and Joshua Fineman.

To contact the reporter on this story: Dana Hull in San Francisco at dhull12@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.