Tesla Inc (TSLA) Stock Is ‘No Longer Investable’

The drama for Tesla Inc (Nasdaq: TSLA) continued last week when CEO Elon Musk smoked marijuana during an interview and Tesla’s chief accounting officer stepped down after less than a month on the job. Some Tesla analysts are sticking with Musk and Tesla through the turmoil, but Tesla lost one long-time bull on Tuesday.

Nomura Instinet analyst Romit Shah has downgraded TSLA stock from “buy” to “neutral” and reduced his price target from $400 to $300 following Musk’s interview on Joe Rogan’s podcast. Shah, who previously had a “buy” rating for TSLA stock since October 2017, says Musk simply creates too much risk with his behavior and management style. Shah says TSLA stock is “no longer investable” until the company addresses its leadership problem.

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“Mr. Musk’s behavior is well documented and likely contributed to the onslaught of executive departures in recent months,” Shah says.

Shah also says Musk’s number of tweets has increased to 18 per day since May compared to an average of four per day in the previous 18 months.

He says the departure of CAO David Morton was a wake-up call considering Morton’s long tenure as a well-respected executive at Seagate Technology ( STX) for more than 20 years. CNBC reports that Morton felt his input wasn’t being heard or understood during his brief tenure at Tesla.

Shah says Tesla still has a clear growth path ahead, and he estimates the company could reach 1 million deliveries or $50 billion in revenue by “early next decade.” Shah says he has been one of the most bullish analysts on Wall Street when it comes to Tesla’s innovation potential and unique business model, which includes owning its battery manufacturing and a large portion of its supply chain. However, he says Musk’s behavior has forced him to abandon the stock, at least for now.

[See: The 10 Most Valuable Auto Companies in the World.]

“Notwithstanding improving fundamentals, we believe that Tesla is in need of better leadership and are moving to the sidelines until we see what happens with management,” Shah says.

TSLA stock traded lower by 3.6 percent on Tuesday following the downgrade and is down more than 21 percent in the past month.

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