‘Pretty bearish on Tesla’: Market pro says price cuts will hit the EV giant’s share price
Tesla shares are unlikely to make a comeback over the medium term partly due to the price cuts the electric automaker announced late last year, according to tech investor Mark Hawtin. “I’m pretty bearish on Tesla,” said Hawtin, investment director at Zurich-based GAM Investments. He added that shares would “definitely” not rise back to their $300 mark, pointing toward headwinds such as the sharp fall in the resale value of Tesla cars that had led to a rise in lease costs. The company’s shares have declined by 30% since September when they were trading around $300. Shares were trading around $205 on Monday. Recent data from credit broker Electrifying supports Hawtin’s view. Tesla’s price drop on Model 3 and Y has caused monthly repayments for lenders financing the vehicles to skyrocket by 57%. This is because the end value of the cars has fallen for lenders, which have raised their prices to compensate for the shortfall. “That puts it out of the reach of many, many people,” Hawtin told CNBC’s Pro Talks Wednesday. This, in turn, could lead to lower demand for Tesla’s products, impacting margins and profitability, according to Hawtin. “I think we will see lower demand at a time when they’re ramping up factories around the world,” he added. Hawtin oversees several global long-only and long/short funds at GAM, which says it has around $80 billion in assets under management. He invests in disruptive growth and technology stocks. If Hawtin’s thesis proves correct, it will come at an unfortunate time for the Texas-headquartered company. Tesla has been ramping up production globally to meet its 50% multi-year annual growth rate. It now operates a U.S. vehicle assembly plant in Fremont, California, a newer one in Austin, Texas, its first overseas factory in Shanghai, and another one in Gruenheide, Germany. Analysts from Bernstein have also voiced concerns over a possible “demand cliff” for Tesla. “We believe that many investors underestimate the magnitude of the demand challenges Tesla is facing,” they said in a note to clients on Jan. 12. The investment bank had an “underperform” rating and a price target of $150 on shares of Tesla as of Feb. 22, representing a downside of 26% from current levels. TSLA 1Y line However, more bullish analysts, such as Morgan Stanley’s Adam Jonas, expect the stock to rise by 20% to $220. According to Jonas, the stock could jump on any new plans from the automaker for the “mass adoption of EVs at far lower price points” on its Mar. 1. Investor day. “As the competition in EVs intensifies and we see the first signs of a deflationary EV environment, doubling down with a re-vamped Model 3 can bring new enthusiasm and cost savings,” Jonas said in a note to clients on Feb. 22. — CNBC’s Michael Bloom and Lora Kolodny contributed to this report.
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