Shares of Tesla (NASDAQ: TSLA) continue to freefall on Wednesday as the once high-flying stock plunged to a 52-week low amid questions related to Model 3 production ramp and the recent fiery, fatal crash involving a Model X.
Shedding nearly $20 billion in market capitalization since shares of Tesla crest $389.61 a share on September 18, 2017, the Silicon Valley-based electric carmaker could be facing a cash flow crunch as investors continue to remove their bets from the table.
Still, for some Wall Street analysts like Adam Jonas of Morgan Stanley, they see the slump as a prime buying opportunity.
“We think that we are looking at one of the buying opportunities that many investors have been waiting for,” said Jonas on Wednesday in a note to clients. “We’d use further weakness from here as an opportunity to build an Equal-weight position in the stock.”
Trading down more than 17% since the start of the year, shares of Tesla (TSLA) are straddling a bull and bear territory, which could present itself as both a buy or sell opportunity depending on which side of the fence you’re on when it comes to believing in CEO Elon Musk’s vision for the future.
Following Moody’s downgrade of Tesla’s credit rating, Morgan Stanley maintained an equal weight rating for Tesla shares on Wednesday, citing Model 3 production concerns as the cause for the sharp drop in share price.
“A sharp drop in Tesla’s share price in part reflects questions on Model 3 ramp … an event that directly impacts both the company’s near-term cash needs and ability to potentially access the market for capital,” said Jonas of Morgan Stanley. The analyst further noted, “For a company widely expected to continue to fund its strategy through external capital raises, a fall in the share price can take on a self-fulfilling nature that further exacerbates the volatility of the share price.”
Aside from concerns over Tesla’s ability to ramp Model 3 production numbers and meet Musk’s twice-shifted guidance of 2,500 vehicles produced per week to the end of the second quarter, combined with steep competition coming from the likes of Google’s Waymo, in partnership with Jaguar’s all-electric I-PACE SUV, and the story of Model 3 becoming a market-dominating vehicle suddenly becomes just that in the eyes of investors – a story.
Nevertheless, it’s a crucial time for Tesla as all eyes remain fixed on Model 3 production numbers, which the company is expected to release next week.
“Investor focus is still very largely dominated by the Model 3 ramp … specifically its ability to affect sentiment and near-term cash flow (working capital),” said Morgan Stanley to its clients.
Shares of Tesla have bounced back after hitting a 52-week low at $252.10 in intraday trading, now down 6.21% at $261.79 a share.