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Despite the recent pullback, 2020’s frothy stock market has provided Tesla (TSLA) investors with massive returns. However, if Wall Street’s most prominent Tesla bear has his way, the next 12 months will be a steep descent to the bottom.
GLJ Research analyst Gordon Johnson expects Tesla shares to be changing hands for $19 each a year from now (yes, that’s not a typo), implying a decline of 96%. Needless to say, Johnson’s rating for Tesla is a Sell. (To watch Johnson’s track record, click here)
Johnson has so many issues with Tesla, it is hard to know where to start. On the plus side, the analyst estimates Tesla’s overall 2020 deliveries will hit 494,848, which is only just below Tesla’s 2020 guidance for 500,000. And that is where the plus side ends.
The problems? Let’s see. Take away “FSD (full self-driving) and credit sales in 2020,” and Johnson believes TSLA will lose roughly $200 million “in both 3Q20 and 4Q20,” adding “the core business is still a perpetual loss maker.”
The analyst also believes Tesla has a tendency “to shift numbers around as it sees fit (as it did in 1H20 where credit sales jumped to $782mn vs. $267mn in 2H19) - making modeling the company's earnings more an ‘art’ than science.”
And while Tesla is now eligible to join the S&P 500 after recording profits for 4 consecutive quarters, Johnson argues this is probably only due to recognizing “71% of the full value of the FCA credits due to the company over the next three years in just two quarters.”
What else? Tesla’s FSD product is “vaporware.” Sales are trending down in most regions (US and Canada and in Europe), whilst the data points to “disappointing” sales in China.
Additionally, the parabolic rise in Tesla shares – “a valuation approaching that of more than the entire global auto industry” - has nothing to do with fundamentals, with the fed pumped US markets "structurally broken" and a “bubble building in markets that are not properly functioning.”
Nevertheless, Johnson predicts another "Rabbit-Out-of-the-Hat" in 3Q20 and believes “once again consensus will be ‘Bedazzled’ by the ‘Magic Show.’"
“When does it end?” Johnson asks, “We don't know... but what we are confident of is that TSLA's fundamentals are worsening by the day, and when this ends TSLA will trade down to fair value. Thus, despite all the, quite frankly, BS analysis (lacking of any actual numbers) we see out there, we are sticking with our fundamental view.”
It is hard to match such a bearish outlook, although the Street is hardly peppered with Tesla bulls. TSLA's Hold consensus rating is based on 5 Buys, 15 Holds and 10 Sells. Over the next 12 months, the analysts expect shares to be changing hands at a 30% discount, given the $292.85 average price target. (See TSLA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.