Morgan Stanley slashes worst-case price for Tesla to US$10

Munich

TESLA Inc was delivered another blow on Tuesday by Morgan Stanley analysts who slashed their worst-case estimate to just US$10 a share over concerns that the electric car leader has saturated the market.

"Demand is at the heart of the problem," analysts led by Adam Jonas said in a note. "Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals."

He lowered his bear-case outcome for Tesla shares from a previous estimate of US$97, which assumes Tesla misses its current sales forecast in China by about half. The analysts kept a price target of US$230, while the stock fell 1.6 per cent in pre-market trading.

Tesla has drawn a chorus of negative reports in recent days, triggered by flagging deliveries. Tesla handed over just 63,000 cars in the first quarter but expects to deliver 90,000 to 100,000 cars in the second, and 360,000 to 400,000 for the year. On Sunday, Wedbush Securities analyst Dan Ives said hitting the full-year target is going to be a "Herculean task".

Tesla has declined 38 per cent since the start of the year and on Monday breached the US$200 a share level, before closing 2.7 per cent lower at US$205.36.

To boost demand, Tesla will have to expand aggressively into China, offer lower-priced sport utility vehicles and supply mobility fleets, Mr Jonas said. A US carmaker growing sales in China is at risk from trade tensions with the US, he added.

"We give Tesla credit for tapping into the world's largest EV market for a number of years" in China, Mr Jonas said. "We strongly suspect a host of national champions to emerge" in the country. BLOOMBERG