Tesla slides as HSBC initiates coverage with $146 price target, cites Musk risk

HSBC analysts argue one of Tesla's biggest near-term risks is tied to its controversial CEO.

Nov 9, 2023 - 19:30

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Tesla slides as HSBC initiates coverage with $146 price target, cites Musk risk

Tesla TSLA shares moved lower in pre-market trading after analysts at HSBC initiated coverage of the clean energy carmaker with a muted rating and a discounted price estimate, citing elevated investor optimism and challenging delivery targets.

HSBC analyst Michael Tyndall started the bank's coverage of Tesla with a 'reduce' rating and a $146 per share, implying a 34% decline from current levels, noting that the carmaker's goal of reaching 20 million deliveries by 2030 as the key medium-term challenge.

Tesla said last month that it's on pace to meet its 2023 goal of 1.8 million EVs, although CEO Elon Musk cautioned that an earlier ambition of growing overall deliveries by 50% each year may not be possible.

Tyndall also suggested that capital costs linked to many of Tesla's objectives beyond its core EV business, such as the licensing of full-self driving (FSD) technologies, its Dojo supercomputer and the recently-unveiled Optimus robot, "should be well above the group average given the regulatory and technological challenges they face."

The bank also highlighted a key risk to Tesla under Musk, by some measures the world's richest man, given the level of influence he has on both its business fundamentals and its overall investor perception.

“Elon Musk’s global fame has afforded the group a customer awareness that far outweighs the money it has spent on marketing and advertising, which is therefore a tangible benefit to the P&L," Tyndall said. "Leaving aside the current legal issues Elon Musk faces, we think his prominence presents a considerable 'singleman' risk at the group."

Tesla shares were marked 1.17% lower in pre-market trading to indicate an opening bell price of $219.51 each, a move that would still leave the stock with a six-month gain of around 30%.

Short interest in Tesla stock, however, remains elevated at the highest levels in the world, with investors placing bets against the group of around $18.63 billion, or 3.03% of the stock's entire float, according to data from S3 partners.