Deutsche Bank analyst Emmanuel Rosner is defending his decision to downgrade Tesla as the company may move away from making low-cost cars, citing a significant change in the investment case for the stock. . “Earnings are under pressure, free cash flow is under pressure,” he said Thursday on CNBC’s “Squawk on the Street.” “There’s no turning point, this is changing the thesis. That’s why we’re downgrading the stock.” Rosner’s comments came after the longtime Tesla bull downgraded the stock to “hold” from buy as the electric car giant plans to potentially no longer produce low-cost Model 2 cars. Instead, it will produce self-driving robotaxis. The stock fell 3% on the downgrade, leading to a year-to-date loss of 39%. Rosner sees the Model 2 as a potential solution to Tesla’s aging product line, recent price cuts, and the “structural” issues plaguing the company as of late. “We believe this will have a large, large negative impact on earnings and free cash flow forecasts for the foreseeable future,” he said.
