Tesla's Stock Continues Fall After JPMorgan Cuts Target To $195

Tesla Inc TSLA CEO Elon Musk made his intentions clear he wants to take his company private at $420 per share. JPMorgan analysts cast some doubt on the latest developments, which reinforces a bearish stance on the stock.

The Analyst

JPMorgan analysts led by Ryan Brinkman maintain an Underweight rating on Tesla's stock with a Dec. 2018 price target lowered from $308 to $195.

The Thesis

Musk's Aug. 7 Tweet gave the impression an entity had "firmly decided" to fund a transaction to take Tesla private and the board was at the very least informally supportive of a deal, Brinkman said in a note. However, the CEO's follow-up comments on Aug. 13 implies any deal is in reality "potentially far from being formally proposed."

Given the inconsistency in comments from Tesla, JPMorgan said it's appropriate to take a different approach in valuing the stock and remove a 50 percent weighting that was previously assigned to a going private transaction at $420 per share. The firm's revised $195 price target is based on a pure fundamental basis, which factors in a blend of P/E, EV/EBITDA, and Price-to-Sales multiples.

The price target could move up or down based on new developments which impact the likelihood of a transaction occurring or not, the analysts said.

Price Action

Shares of Tesla fell as much as 7 percent in Monday's pre-market session. At time of publication, the stock was down about 2.6 percent at $297.63 per share.

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