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Tesla analyst slashes his target again, and says everything you think you know about it is in question (TSLA) from Ayman's blog

Elon Musk

  • Tesla`s price target got slashed at Evercore ISI for the second time in a month on Wednesday.
  • The analysts` persistent concerns surrounding demand and growth prompted the cut.
  • Tesla`s rich valuation can only be justified by extraordinary growth and execution, "both of which are question right now," they said.
  • Watch Tesla trade live.

For all the volatility, executive turnover, and legal battles, investors have awarded Tesla a pretty nice valuation relative to its luxury auto peers.

But Tesla`s worth is becoming harder to justify, even as it burns through cash as other automakers tend to do, Evercore ISI analysts argue in a new report.

Consider Tesla`s enterprise value is 53 billion — far richer than that of other luxury original equipment-manufacturer peers like Volkswagen`s 36 billion, BMW`s 15 billion, and Daimler`s 27 billion, Evercore analysts led by Arndt Ellinghorst said.

"The only thing that can justify such valuations is supernatural growth and best in class execution," they added. "Both are in question right now."

Tesla`s sales revisions compared with its forward EV/sales ratio.

They continued: "Tesla is a car company. It needs and burns cash like a car company. The longer questions around execution and growth persist, the more difficult the valuation is to defend."

For that reason, along with their unabated concerns over demand, production, and broader macroeconomic conditions, the analysts cut their target price for a second time in just four weeks, lowering it to 200 from 240 a share. On April 22, the analysts slashed their target to 330 and downgraded the stock to "underperform."

Evercore has joined a number of other Wall Street firms, like Morgan Stanley and Cowen, in dropping their price targets in recent months amid demand concerns and weaker-than-expected quarterly earnings.

Read more: A Tesla bear cut its price target for the company by 6%, saying Elon Musk`s upcoming capital raise is too small 

But they didn`t stop there.

Evercore also lowered its delivery estimates across all models, along with revenue and earnings per share estimates for the next two years. That reflects the analysts` belief that Model 3 volume could peak in 2020.

"Growth cannot stall for growth companies," Ellinghorst`s team wrote. "We believe street estimates are way too high, and production shortfalls will continue through the year."

Tesla shares fell by as much as 3% on Wednesday. They`re down 31% this year.

Read more Tesla coverage from Markets Insider and Business Insider:

Tesla reached a 13 million settlement with a former contract worker who was left permanently disabled after being struck by a Model S while on the job

Tesla`s stock is `caught in a flywheel of concerns,` says Morgan Stanley analyst who just cut his price target for the 4th time this year

Tesla posts huge loss, says deliveries are still on track despite `aggressive schedule`

Tesla shares.

Join the conversation about this story »

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