Tesla shares will fall dramatically the rest of this year as CEO Elon Musk’s going private proposal is becoming more tenuous, according to J.P. Morgan.
The firm slashed its December 2018 price target for Tesla shares back to $195 from $308, representing 36 percent downside to Friday’s close.
“We are reverting to valuing Tesla shares on the basis of fundamentals alone, which entails a $113 reduction in our price target back to the $195 level where it stood prior to our August 8 note in which we newly weighted 50% in our valuation analysis a go private scenario for which funding was at that time said to have been secured to take the company private at $420 per share,” analyst Ryan Brinkman said in a note to clients Monday. “Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal.”
Brinkman reiterated his underweight rating for the carmaker.
Tesla shares are down 2.8 percent in Monday’s premarket session.
The analyst cited on August 13, which said the Saudi fund was asking for “additional details” on how the company would be taken private.
“The revelation the Saudi fund is subsequently asking Tesla for details of how the company would be taken private suggests to us that any deal is potentially far from even being formally proposed, which is different from our understanding on August 8 which was based on Mr. Musk’s statement on Twitter,” he said. “Tesla does appear to be exploring a going private transaction, but we now believe that such a process appears much less developed than we had earlier presumed (more along the lines of high level intention), suggesting formal incorporation into our valuation analysis seems premature at this time.”
Tesla did not immediately respond to a request for comment.