Yesterday it was Morgan Stanley, today it’s Citi. Please explain to me why these analysts feel it necessary to shill for headlines with nonsensical bear case scenario extreme price targets? Let me be clear, Citi still has a price target of $191 on TSLA, but thinks the stock can hit $36 if everything goes wrong.
I think Citi has a greater chance of going to zero than TSLA to $36. After all, should we get another credit crisis and Citi is forced to mark down assets to extremely low levels, they probably won’t have enough capital to remain solvent.
Here are the notes.
Morgan Stanley caused a stir on Tuesday when star auto analyst Adam Jonas put out a “bear case” scenario that envisioned Tesla’s shares plummeting to just $10.
And now a Citigroup Global Markets analyst is out with another shocking scenario for Elon Musk’s electric car maker.
Citi’s Itay Michaeli sees increasing probability the shares plummet more than 80% to $36.
“Maintain sell/high risk as the risk/reward still appears negatively skewed despite the recent capital raise and stock pullback, mainly on lingering demand/FCF (free cash flow) concerns,” the analyst said in a note late Tuesday.
“Reducing estimates to reflect the recent capital raise, Q1 results/guide and our own inputs.”
The analyst cut his regular price target on Tesla to $191 from $238 by adjusting the probabilities of three scenarios, seeing a decreasing chance of a big rally in the stock and an increasing chance of a share collapse. He sees a 40% chance (up from 35%) of a “full bear” scenario of $36, a 55% chance of a “moderate bull” scenario of $253 and a 5% chance (down from 10%) of a “full bull case” of $760.
“So the recent reported internal memo, which seemingly called into question prior guidance, didn’t help the risk/reward calculus. The implications can be serious, since an automaker’s balance sheet is always subject to the confidence ‘spiral’ risk,” Michaeli said.
Don’t worry TSLA longs — there is still a 5% chance the stock can hit $760.
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