Not long ago, it looked as if Tesla had turned the corner: Elon Musk's electric vehicle and solar energy company reported consecutive quarterly profits as it improved its manufacturing capabilities.
But lately, investors have been losing confidence that it can become sustainably profitable as U.S. subsidies wane for its pricey electric vehicles — especially as more rivals, including premium German brands, begin to flood a market that hasn't broadly embraced EVs. Even a proposal to deploy formerly leased vehicles as a fleet of robotaxis failed to inspire enthusiasm in the company's profit potential.
Tesla stock fell 9.7 percent last week and is now down 43 percent since the year began, trading at levels not seen since December 2016. Its market capitalization is once again below that of General Motors and Ford.
"Peak Tesla, the high point of the stock, is over," said David Kudla, CEO of Mainstay Capital Management in Grand Blanc, Mich., who shorted the stock — betting the price will fall — and rates it a sell.
Morgan Stanley analyst Adam Jonas, once among the most bullish on Tesla's potential, held a call with investors to discuss his now-negative views.
He said Tesla is no longer a growth company and more of a "distressed credit story and a restructuring story" in a private call to investors last week, which was heard by Automotive News. Jonas had a price target as high as $379 on Tesla a little over a year ago, according to Bloomberg, but now his worst-case scenario has the shares headed as low as $10.
"At the heart of this is demand," Jonas said of Tesla's setback. "What is changed is demand. That's the first domino."
He warned that Wall Street's "whisper number" for Tesla's second-quarter deliveries is less than 80,000 vehicles — well short of the company's forecast for 90,000 to 100,000.
The stock rebounded a bit Thursday, May 23, after a memo leaked in which Musk told employees that deliveries were on track, but it resumed sliding the next day, ending the week at $190.63.
While the company has long faced questions over its use of cash, Musk resisted raising capital, hoping instead to generate profits to pay down debt.
But even after raising $2.7 billion, he warned employees this month that "hardcore" cost cutting was needed or Tesla could run out of cash in as little as 10 months, Bloomberg reported.
Kudla says trying to become a mass-market automaker could be Musk's undoing.
"The 'go big' mantra will just send him home because the mountains of debt will crush him," Kudla said. "Tesla's chance at comeback requires scaling back to a boutique or niche electric vehicle manufacturer."