Morgan Stanley analysts slashed their worst-case scenario for Tesla’s stocks from $97 to just $10 a share Tuesday a day after the electric car maker’s stocks dropped 4.4 percent in midday trading to $201.83.
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“Demand is at the heart of the problem,” Analyst Adam Jonas wrote in a note.
“Tesla has grown too big relative to near-term demand, putting great strain on fundamentals,” Jonas continued.
The analysts, including Jonas, wrote in a note that they decreased the “bear case” for the electric car company assuming Tesla missed “our current Chinese volume forecast by roughly half to account for the highly volatile trade situation in the region.”
“Our revised bear case assumes Tesla misses our current Chinese volume forecast by roughly half to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention,” the note read.
Shares of Tesla are down 50 percent since September. The California-based company said last month it lost $702.1 million in the first quarter, among its worst quarters in two years. In January, the automaker cut its prices by $2,000 per vehicle.
Tesla CEO Elon Musk predicted another loss in the second quarter but said Tesla would be profitable again by the third.
“We believe as Tesla’s share price declines, the likelihood of the company potentially seeking alternatives from strategic/industrial/financial partners rises,” Morgan Stanley said in the note.
Baird, another brokerage, slashed its price target on Tesla from $400 to $340, “but retained an outperform rating,” Reuters reported.
The Associated Press contributed to this report.