Elon Musk. Picture: REUTERS
Elon Musk. Picture: REUTERS

New York — Nomura Instinet analyst Romit Shah downgraded Tesla on Tuesday morning to neutral from buy in a note titled, No Longer Investable. The note to clients starts by pointing out that previously he was one of the biggest bulls on Wall Street since initiating coverage last October.

Shah slashed his price target on the company to $300 from $400 citing the "erratic behaviour of CEO Elon Musk." Among Shah’s concerns: the increasing number of Musk tweets a day, his cave diver accusations, his outbursts on an earnings call, his taunts of short-sellers and his appearance on Joe Rogan’s podcast.

Shah continues to believe that Tesla can out-innovate the competition and that the company may eventually be much bigger than it is today, but says it’s better to remain on the sidelines until the company has better leadership.

Tesla shares have lost more than 25% of their value since early August in the immediate wake of Musk’s "funding secured" tweet. The shares fell 2% in pre-market trading on Tuesday.

With the stock having fallen so far, and concerns rising among the analyst community, the company is facing greater pressure to deliver on the fundamentals. To this end, Elon Musk tweeted late on Monday night that the company would be eliminating two colour options so as to simplify its manufacturing operations. In a blog post last week, Musk said that the company would build and deliver twice as many cars as it did last quarter.

The company also named Jerome Guillen, who has a reputation as Tesla’s fixer with a good track record of working with Musk, as automotive president.

After Tuesday’s downgrade, bulls on the stock have become the minority with just nine analysts recommending buy, 11 recommending a hold, and 12 recommending a sell, according to data compiled by Bloomberg.

With Luke Kawa

Bloomberg

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