Tesla’s (NASDAQ: TSLA) stock has seen a tremendous bounce of nearly 60% since early February. Now one analyst is warning clients that the ramp was not based on anything fundamental and only downside exists from here.
UBS analyst Colin Langan thinks the run-up is related to a calming of liquidity fears after the company drew down the rest of a $1 billion asset-based loan (ABL). Excitement ahead of the Model 3 reveal and a recovery in gas prices also helped, he said.
Now, however, three items keep them at Sell:
- fundamental headwinds that persist with regards to TSLA’s storage business
- the upcoming Model 3 reveal could be a potential negative catalyst given high expectations and new competitors. Of note, TSLA traded down 14% one month after Model X reveals
- UBS forecasts TSLA to draw down the rest of their ABL by the end of this year. Given what they see as accelerated capex needs into the back half of this year and 2017, a raise could come sooner rather than later.
The analyst sees the stock dropping to $140, or 40% below yesterday’s close.