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JPMorgan dramatically slashes Tesla's stock price forecast

The Tesla crash may just...

Posted: Aug 20, 2018 10:31 PM
Updated: Aug 20, 2018 10:31 PM

The Tesla crash may just be getting started.

At least that's what JPMorgan Chase thinks. The Wall Street firm dramatically slashed its price target on Elon Musk's car company on Monday, causing Tesla shares to briefly tumble.

In a critical research report, JPMorgan analyst Ryan Brinkman wrote that it's "premature" to value Tesla based on a go-private deal that may or may not ever happen.

Musk tweeted on August 7 that funding for a takeover at $420 a share "has been secured." JPMorgan believes that recent events show that funding has not been secured -- "nor was there any formal proposal."

By valuing Tesla on "fundamentals alone," the stock should sink to $195 by December, Brinkman wrote. That's 35% below current levels.

It's a stunning reversal. JPMorgan set its previous price target of $308 on August 8 based on Musk's optimism about a go-private deal.

JPMorgan noted that Musk's own statements create doubt about how close Tesla is to reaching a go-private deal financed by Saudi Arabia's sovereign wealth fund.

In a blog post last week, Musk wrote that "it was just a matter of getting the process moving" with the Saudis.

Those comments suggest that while a deal is "clearly possible," the process is "much less developed than we had earlier presumed," JPMorgan wrote.

Tesla's wild ride

Musk's tweet set in motion a strange series of events for Tesla. The stock spiked as high as $387.46 -- and then plunged. The SEC reportedly launched an investigation into Musk's statements. And Musk gave a tearful interview to The New York Times describing 120-hour work weeks and his use of Ambien to sleep.

As much as a quarter of Tesla's market value has vanished since Musk's initial tweet about going private. Investors are voicing skepticism about the electric car maker's ability to make good on Musk's proposal -- but they're also worried about Musk in general.

"Investors are likely most concerned about Musk's overall mindset and burn out in addition to the use of Ambien and possibly other drugs," analyst Gene Munster wrote to clients on Friday.

Even Arianna Huffington penned an open letter urging the Tesla CEO to slow down. Musk responded -- in a 2:30 a.m. PT tweet -- by saying slowing down is not an option.

"Ford & Tesla are the only 2 American car companies to avoid bankruptcy. I just got home from the factory," Musk tweeted.

Tesla has repeatedly proved its doubters wrong. Since going public in 2010, Tesla has revolutionized the auto industry and accelerated the adoption of electric cars. While the company has struggled to turn a profit, its share price has skyrocketed. Now valued at $52 billion, Tesla is worth more than either Ford or General Motors.

But Tesla's goal of rapidly building affordable cars for mass markets has proven difficult. The company has been forced to raise money and take on vast amounts of debt while attempting to meet aggressive goals.

Tesla's expansion into high-volume segments "seems fraught with greater risk," JPMorgan wrote.

Indiana Coronavirus Cases

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Cases: 614946

Reported Deaths: 9807
CountyCasesDeaths
Marion849231342
Lake45784693
Allen33103560
Hamilton29752316
St. Joseph27572383
Elkhart24496346
Vanderburgh19679255
Tippecanoe18150144
Johnson15234296
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Madison11071223
Clark10852145
Vigo10819185
Monroe9496115
Delaware9193136
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Hancock6783106
Bartholomew6659100
Floyd6522113
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Grant6050118
Dubois559081
Boone557968
Morgan551996
Henry512365
Marshall507884
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Cass487864
Noble476159
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Ohio Coronavirus Cases

Data is updated nightly.

Cases: 872918

Reported Deaths: 10856
CountyCasesDeaths
Franklin102616707
Cuyahoga868931154
Hamilton65148455
Montgomery43662420
Summit35411766
Lucas31794634
Butler31451232
Stark26247445
Warren19939144
Lorain19378229
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Clermont16235113
Delaware1463881
Licking13453142
Fairfield1301782
Trumbull12980317
Greene12226144
Medina11798169
Clark11094266
Wood10507158
Allen10031128
Portage9514111
Richland9275134
Miami927273
Marion7512113
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Columbiana7433124
Pickaway735250
Muskingum714042
Wayne7140172
Erie6253130
Ross5589100
Hancock556292
Scioto545365
Geauga518955
Darke474395
Lawrence464658
Union459130
Ashtabula457973
Sandusky440462
Huron435541
Mercer435590
Seneca435366
Auglaize425166
Belmont423948
Jefferson423969
Shelby422923
Washington396340
Athens38619
Putnam379276
Madison359930
Knox358423
Ashland349638
Fulton341744
Defiance336188
Crawford327274
Preble323637
Brown318821
Logan314835
Ottawa297443
Clinton293944
Highland282219
Williams282267
Jackson266145
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Holmes227274
Henry222954
Hardin217033
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Gallia200126
Wyandot198151
Pike180918
Adams179815
Hocking174024
Carroll158216
Paulding145521
Noble121040
Meigs110324
Monroe103433
Harrison89821
Morgan84531
Vinton71714
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