It’s recommended as a top short by a small research firm.
For the most part, analysts tend to be rather cautious and reserved when setting their price targets for stocks. That isn’t the case with Gordon Johnson at GLJ research, who’s very bearish on Tesla (TSLA -4.90%). Johnson expects shares of the electric vehicle (EV) industry leader to lose close to 90% of their value.
Tesla is a prime short sale candidate, says analyst
Near the end of March, Johnson reiterated his sell recommendation on Tesla with a $23.53 per share price target, far below the company’s Monday closing price of about $175 per share.
With that kind of anticipated decline, Johnson has tagged Tesla as his firm’s best short recommendation.
In the research note, Johnson pointed out that Tesla’s $558 billion market cap is larger than rival carmakers Toyota and BYD, combined, yet Tesla sold merely 16% of the automobiles those companies did in the trailing 12-month period.
Although the analyst left his recommendation and price target unchanged, he did revise his estimate for Tesla’s first-quarter vehicle deliveries from 417,500 to 406,500. That’s far below the consensus analyst projection of 462,200.
Unplugging from EVs
Johnson’s take on Tesla is extremely bearish, but it tracks with recent developments. Overall EV sales growth has slowed, and CEO Elon Musk is frequently featured in headlines for various controversies. With shares down 60% from their all-time high, the glitter has come off Tesla stock for the time being.
The company will need to deliver on big promises like its next-generation vehicle platform to win back investor confidence. But even if Tesla faces new delays and challenges, Johnson’s price target remains an extreme outlier. And shorting a stock comes with significant risks, meaning the strategy isn’t appropriate for many investors.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BYD and Tesla. The Motley Fool has a disclosure policy.
