Tesla bear says Elon Musk’s EV maker will ‘go bust,’ stock worth $14

Tesla might “go bust” whereas its inventory might fall to $14, Per Lekander, a hedge fund supervisor who has been shorting Elon Musk’s electrical carmaker since 2020, informed CNBC on Wednesday.

His feedback come after Tesla reported 386,810 automobile deliveries within the first quarter of the yr, considerably beneath even the bottom market estimates.

“This was actually the start of the tip of the Tesla bubble, which in all probability, arguably was the largest inventory market bubble in trendy historical past,” Lekander, managing companion at funding administration agency Clear Power Transition, informed CNBC’s “Squawk Field Europe.”

“I truly suppose the corporate might go bust.” Tesla was not instantly out there for remark when contacted by CNBC.

Lekander was a former portfolio supervisor at funding agency Lansdowne Companions who efficiently referred to as a 2018 rally in carbon costs. Since 2020, Clear Power Transition has been quick Tesla’s inventory, that means Lekander’s agency will revenue if the automaker’s shares fall.

In a March 2021 interview with CNBC, Lekander referred to as for Tesla’s inventory to go down. On the time of the interview, Tesla’s shares closed at $233.94. On Tuesday, the inventory closed at $166.63. However Lekander additionally referred to as for a comeback of the standard automakers, singling out Volkswagen. Volkswagen’s shares have fallen round 53% since that decision, although they’ve rallied at the beginning of this yr.

Lekander has taken his bearish Tesla name additional, suggesting the inventory might fall to $14 per share. He mentioned his name is predicated on an estimate that Tesla’s full-year earnings per share this yr can be $1.40. Lekander argues that Tesla is a “no progress” inventory and must be valued on 10 occasions ahead earnings, versus round 58 occasions ahead earnings at present. Ahead earnings are an essential metric utilized by merchants to gauge the worth of a inventory.

If Tesla’s inventory hit $14, that might characterize round 91% draw back from Tuesday’s shut. Tesla’s shares have already fallen greater than 30% this yr.

“I believe nevertheless Tesla can’t be at $14. If it falls beneath a sure stage due to every thing that is been occurring, it may go bust.”

Lekander gave quite a few causes for his damaging outlook. He mentioned Tesla’s enterprise mannequin has been primarily based on robust income progress, vertical integration and direct-to-consumer gross sales. Vertical integration broadly refers to when one firm internally handles many components of a course of from the manufacturing of the automobile to the software program. This mannequin is “good” when an organization grows, however goes in “reverse” when gross sales fall, Lekander mentioned.

The hedge fund boss mentioned Tesla’s first-quarter issues had been to not do with among the causes the corporate cited similar to provide chain disruption. As a substitute, it’s a “demand downside,” in keeping with Lekander, who mentioned two automobiles — the Mannequin 3 and Mannequin Y — make up the majority of the U.S. automaker’s gross sales. And the corporate doesn’t see one other new automobile being launched till 2025.

“I do not see any purpose in any way to see any restoration over the following two years on condition that these fashions are stale and given the economic system just isn’t rocketing,” Lekander mentioned.

Tesla mentioned in its assertion Tuesday it had confronted quite a few challenges throughout the quarter.

Lekander is amongst a refrain of damaging voices on Tesla following disappointing supply numbers.

“Whereas the long-term proposition {of electrical} autos stays unchanged, the realities of delivering on that proposition are actually beginning to inform as Tesla (and the others) have run out of well-heeled shoppers keen to pay large cash to be beta testers,” Richard Windsor, founding father of Radio Free Cell, mentioned in a analysis observe on Wednesday.

Windsor questioned Tesla’s roughly $500 billion valuation calling it “ludicrous” at a time when the corporate is dealing with rising competitors.

“There may be nonetheless loads of draw back in Tesla’s shares,” Windsor mentioned.

Dan Ives, a famous Tesla bull at Wedbush Securities, who has a $300 value goal on the EV maker, has turn into involved.

“Let’s name this as it’s: Whereas we had been anticipating a foul 1Q, this was an unmitigated catastrophe 1Q that’s onerous to elucidate away. We view this as a seminal second within the Tesla story for Musk to both flip this round and reverse the black eye 1Q efficiency,” Ives mentioned in a observe on Tuesday.

“In any other case, some darker days might clearly be forward that would disrupt the long-term Tesla narrative,” he added.

Analysts at HSBC and TD Cowen minimize their value targets on Tesla’s inventory on Wednesday.

Tesla is arguably one of the crucial divisive shares on Wall Avenue and there are a lot of which might be nonetheless bullish on the agency.

Cathie Wooden’s Ark Make investments purchased Tesla inventory for a few of its funds this week forward of the first-quarter supply numbers in an indication of assist.

In the meantime, some analysts are speaking up the long term potential of Tesla.

Tom Narayan, analyst at RBC Capital Markets, informed CNBC’s “Squawk Field Asia” Wednesday that a lot of the causes behind the autumn in first-quarter deliveries had been “one-time in nature.”

However he mentioned one near-term catalyst could possibly be a latest directive from Tesla’s CEO to workers to put in and present clients how one can use the most recent model of the corporate’s driver help system, marketed as FSD or Full Self Driving. Tesla additionally launched a free-trial of the service for suitable automobiles which often prices $199 per 30 days.

“Perhaps that will get folks within the showrooms, possibly it will get folks to subscribe to it, possibly it will get folks to purchase automobiles. So there may be that near-term catalyst,” Narayan mentioned.

The RBC analyst, who has an “outperform” score on Tesla’s inventory with a $298 value goal, mentioned his valuation is predicated on Tesla’s power storage enterprise which is a “enormous alternative” for the corporate. And he added that “autonomy” can be an enormous a part of his score on Tesla.

“If FSD works, now it is [Tesla] a software program enterprise with a software program multiples,” Narayan mentioned. Tesla’s FSD system doesn’t make a automobile autonomous. It nonetheless requires a driver to take management of the automobile.