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Analyst Sees Over 90% Downside in Tesla (TSLA)

February 9, 2016 10:27 AM EST
Get Alerts TSLA Hot Sheet
Price: $173.80 --0%

Rating Summary:
    24 Buy, 26 Hold, 13 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 9 | Down: 7 | New: 39
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Tesla (NASDAQ: TSLA) is nothing short of a battle-ground stock. On one side stand the bulls who argue Tesla will be the iPhone of the automotive world, leaving the large automakers in the dust with its cutting edge design and technology. On the other side stand the bears who see the company as the second coming of Delorean or Fisker - a flash in the pan that will soon fizzle out. Trading in the stock ahead of its important forth quarter report on Wednesday illustrates the battle - yesterday shares fell 9% for no real fundamental reason, today shares are up 6% on the same. Today a new bear joined the camp... or should we say 'uber-bear', arguing the stock is nearly worthless.

In a report dated February 7, 2016, Unit Economics, a publication of Weiss, Harrington and Associates, LLC, re-initiated coverage on the stock with a Sell rating and $12 price target. The price target suggests 92% downside from current levels.

In the report, analyst Nathan Weiss asks: "How could a high-cost California-based auto manufacturer produce one of the least reliable cars in America, sell it below cost, then convince investors to value the company at nearly six times revenue by pledging to introduce a low-priced, mass market EV into an already crowded marketplace?"

His answer - "We honestly have no f'ing idea."

In the 99-page report, the analyst hammers the company for negative gross margins on the Model S, and for using "every textbook indicator of aggressive accounting." They also highlighted that the company makes "heroic efforts" to sell its cars, while telling investors they are "production constrained."

Further, the analyst highlights "'untruths’ of Tesla Motors and Elon Musk, including the battery swap feature that generated tens of millions of dollars worth of emissions credits but never materialized, the notion that Tesla Superchargers are solar-powered and the belief that EVs are ‘green’ when in fact by some metrics they are as bad as the shamed VW diesels."

Lastly, they highlighted "incredibly damning" Model S reliability data, a clay mock-up of the Model 3 and a drone photo exposing the Gigafactory is a “pilot plant” rather than a game-changer for the Li-ion battery industry.

Tesla Model 3 mock-up:

Drone photo of gigafactorty, which is notably different from the rendering touted to the media and investment community:

Below is the rendering the company touted:



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