Gordon Johnson is well known to many of Teslas most ardent supporters.
As the head of the investment research firm GLJ Research, the Wall Street veteran has developed a reputation as Teslas biggest bear over the past few yearsand for good reason.
Johnson has been offering up pessimistic forecasts on Tesla since 2018, when he was still working as an analyst at the investment bank Vertical Group. And during his time as the head of GLJ Research, he has argued that Teslas core business is loss making and routinely produced price targets that were well below Wall Streets consensus forecast.
But betting against Tesla was a tough call until recently. Between April 2018when Johnson first slapped a sell rating on Teslaand November 2021, when the EV giants stock soared 1900%.
That didnt stop the analyst from sharing his bearish takes, however. And with Tesla stock down roughly 67% in 2022, its been a vindicating year for Johnson.
But the former Lehman Brothers executive still believes Tesla stock will fall more than 80% to just $23 per share over the next year.
Teslas growth storywhich include plans to move more towards robotics, battery storage systems, electric semi-trucks, and other new revenue streamsis a purely distraction from the businesss fundamentals, he says.
Its just a car company: 95% of revenues come from selling cars, 5% from an energy division that loses money, Johnson told CNBC on Thursday. Theyre just a car company that has built too much capacity that they cant sell.
Teslas headwinds
Johnson outlined three key problems that he believes Tesla is facing at the moment: demand, competition, and valuation.
In terms of valuation, investors still put a premium on Tesla compared to its peers in the automotive industry. The EV giant is currently trading at roughly 40 times earnings, while Ford, GM, and Toyota trades at just 5, 6, and 10 times earnings, respectively.
And in terms of market capitalization, Tesla is head and shoulders above the competition as well, even after its 67% stock price drop this year.
Tesla is currently valued at more than the next three largest automakers combined, despite selling just 5% of the cars that those automakers sold in 2021, Johnson noted.
Johnson said that in order to be valued so highly by the market, Tesla needs to show that it is rapidly and sustainably growing. But he believes that demand has become an issue, pointing to price cuts in China, the U.S., and Europe in the fourth quarter.
Companies dont cut prices when demand is strong, Johnson said, arguing Tesla is using price cuts to help fend off rising competition.
While Tesla has been the EV leader in the U.S. for years, Johnson believes that the company has lost its technological edge.
Theres a ton of other cars out there now with equal or better real-world range, better interior, faster chargingso you have to think about the competition, he said.
Finally, Johnson argued that Elon Musk has hurt Teslas stock by selling $40 billion worth of shares and creating drama in the media.
Musk is espousing all these far right-wing conspiracies on Twitter, he said. Hes alienating his key constituency of buyersliberals who think EVs are going to save the world.
The bulls rebuttal
Even Tesla bulls admit that Elon Musks Twitter purchase, subsequent antics, and recent Tesla stock sales have hurt the companys prospects. But they still believe that the long-term growth story is intact.
Garret Nelson, an analyst at the investment research firm CFRA research, said in a Dec. 15 research note that he believes Tesla shares can rise back to $225 per share over the next 12 months.
He argued that the firms U.S. vehicle sales will get a boost next year from federal EV tax credits and the upcoming Cyber Truck launchwhich he says boasts an industry leading backorder.
And Wedbushs tech analyst Dan Ives argues Tesla will hit $250 per share within the next year.
We remain bullish on the long term thesis for Tesla and believe the stock is oversold, he wrote in a note to clients last week.
Ives argues that Tesla is on track to continue growing its EV sales, which he said should be a sign of confidence for Tesla bulls.
Once Musk selects a new CEO for Twitter and refocuses of his golden child Tesla, Ives and Nelson believe the companys stock will be back to its old winning ways.
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