Late last week, Tesla Inc. (Nasdaq: TSLA) announced that its senior vice president of engineering is taking a leave of absence, the latest of at least 13 Tesla executive departures in less than a year. While executive turnover at large companies like Tesla is always a factor for investors, the timing of Tesla’s outflow is starting to raise eyebrows on Wall Street.
On Tuesday, Tesla stock dropped 3 percent after Morgan Stanley analyst Adam Jonas slashed his price target for Tesla stock by more than 22 percent and said the company’s inability to hit its Model 3 production targets could end up costing shareholders dearly.
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“It is our view that the challenges in ramping up Model 3 production reflect fundamental issues of vehicle design, manufacturing process and automation levels that can weigh against the profitability of the vehicle,” Jonas says.
He also says management turnover and Tesla CEO Elon Musk’s “unusual” handling of the company’s most recent earnings call played a role in lowering expectations for the stock. Musk was criticized when he refused to answer analyst questions about cash burn and productivity.
“Following [first-quarter] results, we are making significant cuts to our near-term and long-term auto margin forecasts and allow for marginally greater equity dilution,” Jonas says.
Even Tesla bulls admit the departure of a senior engineering executive is not what investors want to see when the company has so much riding on its Model 3 production. GBH Insights head of technology research Daniel Ives says he is optimistic that Tesla will soon finally hit its near-term target of producing 5,000 Model 3s per week. Tesla orgininally said it would hit that mark by the end of 2017.
“Hitting these all-important targets by the late June, early July time frame will be integral to the stock (and its cash burn situation) during these pivotal few months ahead,” Ives says. “That said, losing a major engineering force within the company at this crucial juncture is a bit head-scratching and does add more uncertainty and worries to the Model 3 production saga.”
[See: 7 Auto Stocks to Drive Income.]
Morgan Stanley has an “equal-weight” rating for Tesla and has lowered its price target for TSLA stock from $376 to $291. GBH Insights has an “attractive” rating and $320 target for Tesla.
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Tesla Departures Concern Analysts originally appeared on usnews.com
