Tesla, Inc. TSLA struggles to break out of the lackluster phase it finds itself in and things are unlikely to look up in the near term, says a bearish analyst.
Risks Abound: It’s time to short Tesla stock again, barring a banking crisis and the Federal Reserve rolling out more emergency loan facilities, said GLJ Research’s Gordon Johnson.
“Barring a banking crisis and the Fed rolling out more emergency loan facilities (i.e., like it did in March this year), TSLA's stock appears set to hit the skids, imminently,” Johnson wrote.
The analyst noted a slew of negative tidings regarding Tesla, including a potential delay in Giga Mexico at least until 2026 and a production slowdown in the Giga Texas and Fremont production plants.
The demand side of the equation also doesn’t paint a positive picture. Model Y inventories were at a record high despite a 10% discount, Johnson said.
He also pointed to the recent weak weekly China insurance data for Tesla vehicles. Following the data, prominent Tesla forecaster TroyTeslike has lowered his third-quarter delivery estimate from 452,000 units to 447,000 units, he added.
Sales in Europe were flat quarter-over-quarter despite price reductions in the geography, the analyst said.
See Also: Everything You Need To Know About Tesla Stock
Johnson also highlighted sell-side comments that were negative. Bernstein analyst Toni Sacconaghi suggested that Tesla may have to reduce EV prices further. The massive rally seen in the first quarter can’t be justified given a lack of clarity on the margin look, the analyst said.
Following investor meetings with Tesla, Deutsche Bank flagged risk to third-quarter production and deliveries due to scheduled summer production pauses, Johnson noted. Additionally, the need to offer discounts on inventory and the absence of substantial cost offsets in this quarter could contribute to incremental downside risks, the firm said.
Why It’s Important: Margin worries have contributed to much of the stock weakness since the release of second-quarter results. Continued margin erosion will only serve to aggravate the weakness.
Clouding the demand outlook is an uncertain economy. The Fed is stubbornly holding on to its hawkish stance, smothering any hopes of an end to the rate-tightening spree. If the economy doesn’t take a turn for the better, it remains to be seen whether the company can capitalize on the interest around its Model 3 refresh and the Cybetruck, which will likely be launched in the coming months.
In premarket trading, Tesla stock fell 0.55% to $250.10, according to Benzinga Pro data.
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