Wedbush Calls Tesla's Q1 One Of The 'Top Debacles' In 20 Years Of Covering Tech

Tesla Inc TSLA’s dismal first-quarter earnings lost the stock one of its most loyal bulls.

The Rating

Wedbush analysts Daniel Ives and Strecker Backe downgraded Tesla to Neutral and cut their price target from $365 to $275.

The Thesis

Inspired by Tesla’s first-mover opportunity in electric vehicles, its competitive research and development program, and the global demand for Model 3s, Wedbush had been bullish on Tesla through the good times and the bad.

“That said, the demand story at Tesla is quickly changing and the company has unfortunately not adjusted to an evolving EV landscape (especially in the US) with the well thought-out marketing and distribution logistics needed to manage this difficult and complex hand holding process for customers, employees, and investors,” Backe and Ives wrote in a note.

They fear management is distracted by robotaxis, insurance products and other side pursuits.

Wednesday’s quarterly report grounded their fears in reality. The firm’s underperformance of already low expectations shook Wedbush’s confidence.

“To this point, in our 20 years of covering tech stocks on the Street we view this quarter as one of top debacles we have ever seen while Musk & Co. in an episode out of the Twilight Zone act as if demand and profitability will magically return to the Tesla story,” Ives and Backe wrote.

By their calculations, management is not cutting costs aggressively enough to create a path to profitability. In fact, they forecast a near-term capital raise of at least $3 billion to sustain capex and pay debt.