Bad News for Tesla as JP Morgan’s Prediction for the Company’s Price Forecast is Crippling!
Thought the Tesla crash was over? Wrong. Looks like a new chapter is in the making.
This is according to a price forecast carried out by JPMorgan Chase. As a matter of fact, the firm etched on Wall Street radically slashed the price forecast on the company on Monday, resulting in a brief drop in the electric car company’s shares.
From the intensely researched report, one of the lead analysts from JPMorgan, Ryan Brinkman wrote that it is highly unlikely for Tesla to go through with its privatization deal due to the ‘premature’ fluctuations of its shares.
The Privatization affair
Since the highly controversial tweet on August 7th regarding plans to privatize Tesla, Musk’s company has been receiving pressure from all directions to see whether the deal will be pulled off.
In the tweet, Musk had hinted that funding to put shares at $420 a share had already been secured. However, according to recent events surfacing, JPMorgan has deduced that it is highly unlikely that funding was secured, or even if there was any formal proposal in the first place!
According to Brinkman, by analyzing the value of Tesla through the considerations of its fundamentals alone, the company’s stock is poised to drop to $195 by the end of the year. This would amount to being 35% beneath the current level that it is at the moment.
Initially, JPMorgan had set the price to about $308 based on the confidence that Musk had regarding the deal to go private on August 8.
Additionally, JPMorgan observed that statements made by CEO Musk were creating doubt and uncertainty regarding Tesla’s ability to finalize the privatization deal with the sovereign wealth fund of Saudi Arabia.
In fact, in a blog post written and published by Musk last week, he stated that the process was on the verge of completion and it was just a matter of getting the process in full gear with the Saudis.
Such comments have raised queries that despite the possibility of a deal going through, the process was way further behind than where most individuals had anticipated it to be by now.
The Tweet that started the rollercoaster
No doubt the tweet posted by Musk set in motion a series of unfortunate instances for the company. First of all, Tesla’s stock experienced a massive spike, peaking at $387.46 before plunging really low.
Additionally, the SEC further launched investigations into Musk’s comments, leading to Musk having quite an emotional interview with the New York Times regarding his dependency on Ambien to sleep, as well as having a 120 hour a week work schedule.
Interestingly, roughly a quarter of the market value by Tesla has disappeared ever since Musk’s tweet regarding the deal. This clearly shows the skepticism that investors have regarding the company’s ability to privatize. Moreover, investors are also concerned about Musk as well.
Musk’s mental and emotional state put to question
Investors seem sincerely concerned about the CEO’s mindset and the possibility that he might have a burnout due to the use of Ambien and other drugs.
In fact, when Arianna Huffington wrote an open letter directed to Musk pleading him to take time off and relax, Musk defiantly responded in a tweet at 2.30 am saying that he didn’t have the option or luxury to slow down.
Moreover, he added that Tesla and Ford were the only two American car companies to have never felt the problems of bankruptcy, and that is why he needs to always be on his toes.
The resilience of Tesla
Over the years, Tesla has repeatedly proved its skeptics wrong. Ever since it went public in 2010, the company has become one of the largest revolutionaries in the automobile industry.
In fact, the company has been at the forefront of electric car innovation, even though it has struggled to be profitable for the last couple of years.
Additionally, the price of its shares has skyrocketed over the years, with Tesla being valued at $52 billion, pitting Tesla at a higher value than General Motors or Ford.
However, Tesla’s objective of constructing affordable electric cars for the masses is proving to be quite an intense process. In certain instance, the company has even raised money to cover some of the debts it has accrued over the years.
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