Model X fails to steer Tesla out of the ditch

A worker installs interior trim on a Telsa Model S sedan.
Noah Berger | Bloomberg | Getty Images

Tesla shares, a cult favorite of traders, are underperforming, down 2 percent in the past week even after the company unveiled the much ballyhooed Model X SUV on Sept. 29. The S&P 500 is up 5 percent over that same time period.

Shares of Elon Musk's car company remain in correction territory, down more than 10 percent from their 2015 highs.

Even the normally uber-bullish Tesla analysts are increasingly worried about the company's ability to meet future forecasts. And that should worry investors expecting a fourth-quarter comeback for the stock.

"Even allowing the Model X ATPs (average transaction pricing) to decline over time through the introduction of lower-spec models leaves what we believe to be a higher-priced vehicle than we expected that may struggle to meet the volume expectations of the market and our forecasts," Adam Jonas of Morgan Stanley wrote in a note to clients Tuesday.

Jonas stated the Model X's initial sticker price of $120,000 to $130,000 was much higher than they expected and would hurt sales. Moreover he is worried about the company's ability to hit its pricing and volume forecast for the upcoming Model 3. His 2020 volume forecast is now 43 percent lower than the 500,000 company guidance.

"The company's (2020) volume target appears predicated on an average transaction price of the Model 3 below $40k units ($35k base price). In our view, we are not expecting production costs and battery costs to decline to a level sufficient to deliver a high-performance EV experience at such price levels." — Adam Jonas of Morgan Stanley

Baird's Ben Kallo downgraded Tesla from "outperform" to "neutral" Wednesday morning lowering his price target from $335 to $282.

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