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Tesla receives lower price target as Goldman questions ‘sustainable demand’ for Model S,3,X

Tesla exhibits its electric cars and energy products at the 2018 LA Auto Show. [Credit: Christian Prenzler/Teslarati]

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Tesla shares (NASDAQ:TSLA) could face some volatility this Thursday, as analysts from Goldman Sachs and RBC Capital Markets downgraded the electric car maker’s stock. In a note to the firm’s clients on Thursday, Goldman Sachs analyst David Tamberrino questioned the “sustainable demand” for Tesla’s Model S, X, and 3, arguing that the “downward path” for the company’s shares will resume.

Tamberrino, who has been one of Tesla’s most aggressive critics in Wall Street, lowered his price target for TSLA stock from $200 per share to $158 per share. This represents a potential ~30% drop from the electric car maker’s $226.43 closing price on Wednesday. In his note, the Goldman analyst argued that the decline in Tesla shares would resume as it becomes evident that demand for the company’s electric cars is “below expectations.”

“We believe that is the largest question for investors to underwrite at this point — what are sustainable demand levels for the Model S, Model X, and Model 3 — and how does that change with the introduction of Model Y production? We believe a downward path for shares will resume as it becomes more clear that sustainable demand for the company’s current products are below expectations,” Tamberrino wrote.

The Goldman analyst did admit that deliveries in the second quarter will likely meet forecasts, though he insisted that delivery forecasts in the second half of the year are too optimistic.

“Volume estimates for the second half of the year look generous considering there are fewer levers (such as lower prices and leasing options) to pull to stoke demand going forward. Further, when coupled with a lack of direct impetus to open up new demand pockets (other than introducing incentives or more attractive financing rates) and another step-down in the US Federal Tax Credit for Telsa vehicles beginning on July 1, we believe 2Q19 was a better environment for demand and thus deliveries, but to a level that is likely not sustainable,” Tamberrino added.

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It was not just the Goldman Sachs analyst that gave Tesla a pessimistic outlook on Thursday. In a recent update, RBC Capital Markets also opted to lower its earnings estimates for the electric car maker.

https://twitter.com/PriceTargetsNet/status/1141568604657373186

Goldman and RBC’s sentiments lie in opposition to the forecasts of Tesla’s supporters from Wall Street. In a recent note, Tesla bull and Berenberg analyst Alexander Haissl noted that claims questioning the demand for the company’s electric cars are “decoupled from reality” and “overblown.” Haissl further argued that the negative sentiments surrounding Tesla today fail to understand Tesla’s “technological and cost advantage” over its competitors.

“Demand worries are overblown, as the Q1 volume weakness was largely self-inflicted by logistic problems, uncertainty about store closures and changing pricing structure, and not indicative of the underlying demand situation,” Haissl wrote.

Baird analyst Ben Kallo, another Tesla bull, noted this past Monday that the recent rise in TSLA shares could be related to the “start of short covering over the next few weeks.” According to Kallo, several aspects are in place today that could trigger short covering, including “several upcoming catalysts,” the 40 million TSLA shares that are currently sold short, and the fact that the “demand issue will be proven false.”

Elon Musk, for his part, has assured Tesla investors that there are no issues with the demand for its vehicles. During the company’s annual shareholder meeting, the Tesla CEO noted that there is even a “decent chance” that Tesla would reach new records in the second quarter.

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Tesla stock was down 1.85% at $222.25 per share after Thursday’s opening bell.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Shareholder group urges Nasdaq probe into Elon Musk’s Tesla 2025 CEO Interim Award

The SOC Investment Group represents pension funds tied to more than two million union members, many of whom hold shares in TSLA.

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Credit: xAI/X

An investment group is urging Nasdaq to investigate Tesla (NASDAQ:TSLA) over its recent $29 billion equity award for CEO Elon Musk. 

The SOC Investment Group, which represents pension funds tied to more than two million union members—many of whom hold shares in TSLA—sent a letter to the exchange citing “serious concerns” that the package sidestepped shareholder approval and violated compensation rules.

Concerns over Tesla’s 2025 CEO Interim Award

In its August 19 letter to Nasdaq enforcement chief Erik Wittman, SOC alleged that Tesla’s board improperly granted Musk a “2025 CEO Interim Award” under the company’s 2019 Equity Incentive Plan. That plan, the group noted, explicitly excluded Musk when it was approved by shareholders. SOC argued that the new equity grant effectively expanded the plan to cover Musk, a material change that should have required a shareholder vote under Nasdaq rules.

The $29 billion package was designed to replace Musk’s overturned $56 billion award from 2018, which the Delaware Chancery Court struck down, prompting Tesla to file an appeal to the Delaware Supreme Court. The interim award contains restrictions: Musk must remain in a leadership role until August 2027, and vested shares cannot be sold until 2030, as per a Yahoo Finance report.

Even so, critics such as SOC have argued that the plan does not have of performance targets, calling it a “fog-the-mirror” award. This means that “If you’re around and have enough breath left in you to fog the mirror, you get them,” stated Brian Dunn, the director of the Institute for Comprehension Studies at Cornell University.

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SOC’s Tesla concerns beyond Elon Musk

SOC’s concerns extend beyond the mechanics of Musk’s pay. The group has long questioned the independence of Tesla’s board, opposing the reelection of directors such as Kimbal Musk and James Murdoch. It has also urged regulators to review Tesla’s governance practices, including past proposals to shrink the board. 

SOC has also joined initiatives calling for Tesla to adopt comprehensive labor rights policies, including noninterference with worker organizing and compliance with global labor standards. The investment group has also been involved in webinars and resolutions highlighting the risks related to Tesla’s approach to unions, as well as labor issues across several countries.

Tesla has not yet publicly responded to SOC’s latest letter, nor to requests for comment.

The SOC’s letter can be viewed below.

Nasdaq+Letter Tsla Socig Final by Simon Alvarez

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Investor's Corner

Tesla investors may be in for a big surprise

All signs point toward a strong quarter for Tesla in terms of deliveries. Investors could be in for a surprise.

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(Credit: Tesla)

Tesla investors have plenty of things to be ecstatic about, considering the company’s confidence in autonomy, AI, robotics, cars, and energy. However, many of them may be in for a big surprise as the end of the $7,500 EV tax credit nears. On September 30, it will be gone for good.

This has put some skepticism in the minds of some investors: the lack of a $7,500 discount for buying a clean energy vehicle may deter many people from affording Tesla’s industry-leading EVs.

Tesla warns consumers of huge, time-sensitive change coming soon

The focus on quarterly deliveries, while potentially waning in terms of importance to the future, is still a big indicator of demand, at least as of now. Of course, there are other factors, most of them economic.

The big push to make the most of the final quarter of the EV tax credit is evident, as Tesla is reminding consumers on social media platforms and through email communications that the $7,500 discount will not be here forever. It will be gone sooner rather than later.

It appears the push to maximize sales this quarter before having to assess how much they will be impacted by the tax credit’s removal is working.

Delivery Wait Time Increases

Wait times for Tesla vehicles are increasing due to what appears to be increased demand for the company’s vehicles. Recently, Model Y delivery wait times were increased from 1-3 weeks to 4-6 weeks.

This puts extra pressure on consumers to pull the trigger on an order, as delivery must be completed by the cutoff date of September 30.

Delivery wait times may have gone up due to an increase in demand as consumers push to make a purchase before losing that $7,500 discount.

More People are Ordering

A post on X by notable Tesla influencer Sawyer Merritt anecdotally shows he has been receiving more DMs than normal from people stating that they’re ordering vehicles before the end of the tax credit:

It’s not necessarily a confirmation of more orders, but it could be an indication that things are certainly looking that way.

Why Investors Could Be Surprised

Tesla investors could see some positive movement in stock price following the release of the Q3 delivery report, especially if all signs point to increased demand this quarter.

We reported previously that this could end up being a very strong rebounding quarter for Tesla, with so many people taking advantage of the tax credit.

Whether the delivery figures will be higher than normal remains to be seen. But all indications seem to point to Q3 being a very strong quarter for Tesla.

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Tesla bear Guggenheim sees nearly 50% drop off in stock price in new note

Tesla bear Guggenheim does not see any upside in Robotaxi.

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tesla showroom
Credit: Tesla

Tesla bear Guggenheim is still among the biggest non-believers in the company’s overall mission and its devotion to solving self-driving.

In a new note to investors on Thursday, analyst Ronald Jewsikow reiterated his price target of $175, a nearly 50 percent drop off, with a ‘Sell’ rating, all based on skepticism regarding Tesla’s execution of the Robotaxi platform.

A few days ago, Tesla CEO Elon Musk said the company’s Robotaxi platform would open to the public in September, offering driverless rides to anyone in the Austin area within its geofence, which is roughly 90 square miles large.

Tesla CEO Elon Musk confirms Robotaxi is opening to the public: here’s when

However, Jewsikow’s skepticism regarding this timeline has to do with what’s going on inside of the vehicles. The analyst was willing to give props to Robotaxi, saying that Musk’s estimation of a September public launch would be a “key step” in offering the service to a broader population.

Where Jewsikow’s real issue lies is with Tesla’s lack of transparency on the Safety Monitors, and how bulls are willing to overlook their importance.

Much of this bullish mentality comes from the fact that the Monitors are not sitting in the driver’s seat, and they don’t have anything to do with the overall operation of the vehicle.

Musk also said last month that reducing Safety Monitors could come “in a month or two.”

Instead, they’re just there to make sure everything runs smoothly.

Jewsikow said:

“While safety drivers will remain, and no timeline has been provided for their removal, bulls have been willing to overlook the optics of safety drivers in TSLA vehicles, and we see no reason why that would change now.”

He also commented on Musk’s recent indication that Tesla was working on a 10x parameter count that could help make Full Self-Driving even more accurate. It could be one of the pieces to Tesla solving autonomy.

Jewsikow added:

“Perhaps most importantly for investors bullish on TSLA for the fleet of potential FSD-enabled vehicles today, the 10x higher parameter count will be able to run on the current generation of FSD hardware and inference compute.”

Elon Musk teases crazy new Tesla FSD model: here’s when it’s coming

Tesla shares are down just about 2 percent today, trading at $332.47.

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