Another Wall Street bank has joined the ranks of research shops predicting a decline in Tesla (TSLA) stock.
HSBC analyst Michael Tyndall, on Thursday, launched coverage of Tesla with a Reduce (or Sell) rating and a $146 price target, suggesting a 33% drop in Tesla’s stock price. In response, Tesla stock closed down almost 5.5% on Thursday, with shares dropping 18.9% in the last month.
Tyndall commended Tesla for being an innovator in the EV sector and unburdened by legacy costs. However, he warned that more than half of HSBC’s future cash flow model for Tesla is based on initiatives that likely won’t yield profits until the end of the decade.
HSBC views Tesla differently than traditional car manufacturers, as it has already established itself as a cost leader in the EV space. While Tyndall acknowledges Tesla’s ambitious growth goals, he questions the credibility of its target of 20 million units produced by 2030.
According to Tyndall, the main challenges to Tesla’s growth story are upcoming non-car products like fully autonomous software, Dojo supercomputer products, and robotics, which are difficult to model from a discounted cash flow perspective due to their nascent status and regulatory uncertainty.
Indeed, Tesla is currently under a NHTSA and Department of Justice investigation into its FSD software and autopilot features, while its rival GM has faced setbacks in its autonomous service.
According to Tyndall, Tesla CEO Elon Musk’s global fame has given the company a significant customer awareness advantage, but it also presents a considerable risk to the company.
Despite portraying itself as more than just Elon Musk, Tyndall believes that Musk represents a significant risk to the company.
On a positive note, Tyndall and the HSBC team have also modeled a bull-case scenario for Tesla with a $280 price target, citing potential upside risks including a faster-than-expected EV transition and a favorable regulatory environment.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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