- The analysts' persistent concerns surrounding demand and growth prompted the cut.
- Tesla's rich valuation can only be justified by extraordinary growth and execution, "both of which are question right now," they said.
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For all the volatility, executive turnover, and legal battles, investors have awarded Tesla a pretty nice valuation relative to its luxury auto peers.
But Tesla's worth is becoming harder to justify, even as it burns through cash as other automakers tend to do, Evercore ISI analysts argue in a new report.
Consider Tesla's enterprise value is $53 billion far richer than that of other luxury original equipment-manufacturer peers like Volkswagen 's $36 billion, BMW 's $15 billion, and Daimler 's $27 billion, Evercore analysts led by Arndt Ellinghorst said.
"The only thing that can justify such valuations is supernatural growth and best in class execution," they added. "Both are in question right now."
They continued: "Tesla is a car company. It needs and burns cash like a car company. The longer questions around execution and growth persist, the more difficult the valuation is to defend."
For that reason, along with their unabated concerns over demand, production, and broader macroeconomic conditions, the analysts cut their target price for a second time in just four weeks, lowering it to $200 from $240 a share. On April 22, the analysts slashed their target to $330 and downgraded the stock to "underperform."
Evercore has joined a number of other Wall Street firms, like Morgan Stanley and Cowen , in dropping their price targets in recent months amid demand concerns and weaker-than-expected quarterly earnings .
But they didn't stop there.
Evercore also lowered its delivery estimates across all models, along with revenue and earnings per share estimates for the next two years. That reflects the analysts' belief that Model 3 volume could peak in 2020.
"Growth cannot stall for growth companies," Ellinghorst's team wrote. "We believe street estimates are way too high, and production shortfalls will continue through the year."
Tesla shares fell by as much as 3% on Wednesday. They're down 31% this year.
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