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Wedbush cut its price target on Tesla shares to $230 from $275 on Monday, citing "major concerns" about the growth plan of Elon Musk's electric vehicle company, as well as U.S. demand for the key Model 3.
"With a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound," Wedbush analyst Daniel Ives said in a note to investors.
Tesla shares closed down 2.7% at $205.36, down nearly 40% this year. During intraday trading the stock dropped below $200 a share for the first time since December 2016.
Wedbush has a neutral rating on Tesla.
Ives said Tesla's ability to reach its end-of-the-year production forecast will be "a Herculean task." The company forecast it will produce 360,000 to 400,000 vehicles by year-end. Ives estimates a "best case scenario" of 360,000 to 370,000 vehicles, although 340,000 to 355,000 is the more "likely path given the current tea leaves in the field around demand."
"Tesla is facing a quagmire as the company is in the midst of building out its next flagship factory in Shanghai with Giga 3, in the early stages of tooling/blueprinting its next Model Y for production slated for 2020, and ramping production of its mid-range and base Model 3 in the US, all while facing a growing cash crunch and high expense structure issue," Ives added.
The company is also trying "to reign in expenses," Ives said, as Musk declared in an email to employees last week. But Ives said Tesla faces "a Kilimanjaro-like uphill climb" to hitting its profitability targets in the second half of 2019. While the recent raise of $2.7 billion in capital was "smart" for Tesla, Ives said the company's management – especially "with an inexperienced CFO at the helm " – is a risk moving forward.