Tesla bear says Elon Musk’s EV maker will ‘go bust,’ stock worth $14

You’re here could “go bust” while its stock could fall to $14, Per Lekander, a hedge fund manager who has been shorting Elon Musk’s electric car maker since 2020, told CNBC on Wednesday.

His comments come after Tesla reported 386,810 vehicle deliveries in the first quarter of the year, significantly below the lowest market estimates.

“It was really the beginning of the end of the Tesla bubble, which was probably, arguably, the biggest stock market bubble in modern history,” said Lekander, managing partner of an investment management firm. Clean energy transition, told CNBC’s “Squawk Box Europe.”

“In fact, I think the company might go bankrupt.” Tesla was not immediately available for comment when contacted by CNBC.

Lekander was a former portfolio manager at the investment firm Lansdowne Partners who successfully caused carbon prices to rise in 2018. Since 2020, Clean Energy Transition has been shorting Tesla shares, meaning the company of Lekander will make a profit if the automaker’s shares fall.

In an interview with CNBC in March 2021, Lekander called for a drop in Tesla shares. At the time of the interview, Tesla stock closed at $233.94. On Tuesday, the stock closed at $166.63. But Lekander also called for a return of traditional automakers, emphasizing Volkswagen. Volkswagen shares have fallen about 53% since that call, although they rebounded earlier this year.

Lekander took his bearish talk on Tesla further, suggesting the stock could fall to $14 per share. He said his call was based on an estimate that Tesla’s earnings per share for the full year would be $1.40. Lekander says Tesla is a “non-growth” stock and should be valued based on 10 times forward earnings, compared to around 58 times forward earnings currently. Forward earnings are an important metric used by traders to assess the value of a stock.

If Tesla stock hits $14, that would represent a drop of about 91% from Tuesday’s close. Tesla shares have already fallen more than 30% this year.

“I think Tesla can’t be at $14, though. If the price falls below a certain level because of everything that’s happening, it’s going to go bankrupt.”

Lekander gave several reasons for his negative attitude. He said Tesla’s business model was based on strong revenue growth, vertical integration and direct sales to consumers. Vertical integration generally refers to when a company manages many parts of a process, from car manufacturing to software, in-house. This model is “brilliant” when a business is growing, but “reverses” when sales fall, Lekander said.

The hedge fund boss said Tesla’s first-quarter problems were not related to some of the reasons cited by the company, such as supply chain disruption. It’s more of a “demand problem,” according to Lekander, who said two cars — the Model 3 and Model Y — make up the bulk of the U.S. automaker’s sales. And the company doesn’t plan to release another new vehicle until 2025.

“I don’t see any reason to see any recovery over the next couple of years given that these models are outdated and the economy is not taking off,” Lekander said.

Tesla said in its statement Tuesday that it faced numerous challenges during the quarter.

Lekander is part of a chorus of negative voices against Tesla following disappointing delivery figures.

“While the long-term proposition of electric vehicles remains unchanged, the realities of implementing that proposition are really starting to sink in as Tesla (and others) run out of affluent consumers willing to pay big bucks. money to become beta testers.” Richard Windsor, founder of Radio Free Mobile, said in a research note Wednesday.

Windsor questioned Tesla’s roughly $500 billion valuation, calling it “ridiculous” at a time when the company faces growing competition.

“Tesla stock still has a lot of downside,” Windsor said.

Dan Ives, a noted Tesla bull at Wedbush Securities who has a $300 price target for the electric vehicle maker, grew concerned.

“Let’s call it this: while we expected a bad 1Q, it was a total disaster in 1Q, difficult to explain. We see this as a pivotal moment in Tesla’s history for Musk to turn things around and reverse the trend .black eye performance in the first quarter,” Ives said in a note Tuesday.

“Otherwise, darker days could clearly lie ahead and disrupt Tesla’s long-term narrative,” he added.

Analysts at HSBC and TD Cowen lowered their price targets on Tesla stock on Wednesday.

Tesla is arguably one of the most controversial stocks on Wall Street and many remain bullish on the company.

Cathie Wood’s Ark Invest bought Tesla shares for some of its funds this week ahead of first-quarter delivery numbers, in a sign of support.

Meanwhile, some analysts are talking about Tesla’s long-term potential.

Tom Narayan, an analyst at RBC Capital Markets, told CNBC’s “Squawk Box Asia” on Wednesday that most of the reasons behind the drop in deliveries in the first quarter were “one-off in nature.”

But he said a near-term catalyst could be a recent directive from Tesla’s CEO to employees to install and show customers how to use the latest version of the company’s driver assistance system, marketed as of FSD or Full Self Driving. Tesla also launched a free trial of the service for compatible cars, which typically costs $199 per month.

“Maybe it gets people into showrooms, maybe it gets people to subscribe, maybe it gets people to buy cars. So there’s that catalyst short term,” Narayan said.

The RBC analyst, who has an “outperform” rating on Tesla stock with a $298 price target, said his valuation is based on Tesla’s energy storage business, which is a “huge opportunity” for the company. And he added that “autonomy” is also a big part of his rating on Tesla.

“If FSD works, now it (Tesla) is a software company with multiple software programs,” Narayan said. Tesla’s FSD system does not make a car autonomous. A driver must always take control of the car.