Tesla CEO Elon Musk speaks at the Atreju political conference organized by Fratelli d’Italia (Italian Brotherhood) on December 15, 2023 in Rome, Italy.
Antonio Masillo | Getty Images
Tesla Hedge fund manager Per Lekander, who has been shorting Elon Musk’s electric car maker since 2020, told CNBC on Wednesday that the company could “go bankrupt” and its stock price could fall to $14.
His comments came after Tesla reported first-quarter vehicle deliveries of 386,810 vehicles, well below the market’s lowest expectations.
“This is really the beginning of the end of the Tesla bubble, which may be the largest stock market bubble in modern history,” said Lekander, managing partner at the investment management firm. Clean energy transition, presented at “Squawk Box Europe”.
“I actually thought the company might go bankrupt.”
Tesla had no immediate comment when contacted by CNBC.
Lekander, a former portfolio manager at investment firm Lansdowne Partners, successfully predicted the rise in carbon prices in 2018. Clean Energy Transition has been shorting Tesla’s stock since 2020, meaning Lekander’s firm stood to profit if the automaker’s stock price fell.
In an interview with CNBC in March 2021, Lekander called for Tesla’s stock price to fall. As of the time of the interview, Tesla shares closed at $233.94. On Tuesday, the stock closed at $166.63.But Lekander also called for a comeback by traditional automakers, noting specifically that Volkswagen. Volkswagen shares have fallen about 53% since that call, despite gains earlier this year.
Lekander went further bearish on Tesla, suggesting the stock could fall to $14 per share. He said his decision was based on an estimate of the company’s full-year earnings per share of $1.40 this year. Lekander believes that Tesla is a “no-growth” stock and its expected price-to-earnings ratio should be 10 times, while the current expected price-to-earnings ratio is about 58 times. Forward earnings are an important metric used by traders to measure the value of a stock.
If Tesla shares hit $14, it would be down about 91% from Tuesday’s closing price. Tesla shares have fallen more than 30% this year.
“But I don’t think Tesla can get to $14. If it falls below a certain level because of everything that’s going on, it’s going to go bankrupt.”
Lekander gave some reasons for his negative opinion. He said Tesla’s business model is based on strong revenue growth, vertical integration and direct-to-consumer sales. Vertical integration broadly refers to a company handling many parts of its processes in-house, from car manufacturing to software. This model was “brilliant” when the company was growing, but “reversed” when sales declined, Lekander said.
The hedge fund boss says Tesla’s first-quarter problems are related to Some of the reasons cited by the company Such as supply chain disruptions. Rather, it’s a “demand issue,” Lekander said, noting that the Model 3 and Model Y account for the majority of the U.S. automaker’s sales. The company doesn’t expect to release another new car until 2025.
“Given that these models are outdated and the economy is not flying high, I don’t see any reason to see any recovery over the next two years,” Lekander said.
Tesla said in its statement On Tuesday, the company faced many challenges this season.
Tesla’s negative voices are increasing
Lekander is among those speaking negatively about Tesla amid disappointing delivery numbers.
“While the long-term proposition of electric vehicles remains the same, as Tesla (and others) have run out of affluent consumers willing to spend big bucks to become beta testers, the reality of realizing that proposition is really starting to set in,” Free Mobile Radio founder Richard Windsor said in a research note Wednesday.
Windsor questioned Tesla’s valuation of about $500 billion, calling it “ridiculous” at a time when the company faces increasing competition.
“Tesla’s stock price still has a lot of downside,” Windsor said.
Dan Ives, a prominent Tesla bull at Wedbush Securities who has a $300 price target on the electric car maker, is concerned.
“Let’s call it this: While we expected the first quarter to be terrible, it was an utter disaster that’s hard to explain. We think this is a seminal moment in the Tesla story, and for Musk, either Turn it around or turn it around. “First quarter results were poor,” Ives said in a note on Tuesday.
“Otherwise, there are clearly some dark days ahead that could disrupt Tesla’s long-term growth,” he added.
Analysts at HSBC and TD Cowen lowered their price targets on Tesla shares on Wednesday.
Cathie Wood buys Tesla stock
Tesla is arguably one of Wall Street’s most divisive stocks, and many remain bullish on the company.
Cathie Wood’s Ark Invest acquires Tesla This week’s early first-quarter delivery numbers for some of its fund stocks are a sign of support.
Meanwhile, some analysts are talking about Tesla’s long-term potential.
RBC Capital Markets analyst Tom Narayan told CNBC’s “Squawk Box Asia” on Wednesday that much of the first-quarter delivery decline was “one-off.”
But he said a near-term catalyst could be a recent directive from Tesla’s chief executive to employees to install and show customers how to use the latest version of the company’s driver-assistance system, which is marketed as FSD. Or fully autonomous driving. Tesla has also launched a free trial for compatible cars, which normally costs $199 per month.
“Maybe that will draw people into showrooms, maybe that will draw people into subscribing to it, maybe that will draw people into buying cars. So that’s the near-term catalyst,” Narayan said.
The RBC analyst, who has an outperform rating on Tesla shares and a $298 price target, said his valuation is based on Tesla’s energy storage business, which is a positive for the company. A “huge opportunity.” He added that “autonomy” is also an important part of his rating on Tesla.
Narayan said: “If FSD works, now (Tesla) will be a software company that doubles its software business.” Tesla’s FSD system does not enable cars to drive autonomously. It still requires a driver to control the car.
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