Warnings about Tesla are growing louder as Morgan Stanley slashes its worst-case scenario to $10 a share (TSLA)
- Tesla shares fell early Tuesday after Morgan Stanley's auto analysts adjusted their bear case for the stock.
- The analysts, led by longtime Tesla-watcher Adam Jonas, cut their worst-case scenario target to $10 from $97.
- While the firm's price target was held at $230, the extreme downside implies a 95% drop from current levels.
- Watch Tesla trade live.
A Morgan Stanley analyst once dubbed Tesla's "cheerleader" drastically lowered his worst-case scenario for the stock to just $10 from $97, citing underlying demand. Shares fell 3% early Tuesday.
"The reduction in our bear case to $10 is driven primarily by our concerns around Chinese demand for Tesla products," a team led by Adam Jonas wrote in a Tuesday note to clients.
"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."
While this target represents an extreme situation, and its base-case target remains $230 a share, it reflects Wall Street's rapidly declining confidence in the electric-car maker.
Tesla analysts have scrambled to chop down their earnings outlooks in recent weeks, with Jonas himself lowering his base-case target four times this year.
Between late March and late April, Tesla was among the stocks in Morgan Stanley's broader coverage universe with the most negative month-over-month changes in earnings expectations.
During that time, Tesla analysts lowered their earnings estimates for the next 12 months by 33%, with just three names seeing more severe cuts, according to a Monday report from the firm's quantitative analysts.
Tesla shares were down 38% this year through Monday.
This story is developing. Check back for updates.
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