Why Morgan Stanley thinks Tesla action could drop 95% to 10 USD

Tesla's recent efforts to raise $ 2 billion in fresh capital, including CEO Elon Musk, himself buying $ 10 million worth of Tesla shares, have been considered bad news on Wall Street. FilmMagic / FilmMagic for HBO

After a series of losses of several months, Tesla shares fell to a new low in two years below the $ 200 mark on Tuesday morning after Morgan Stanley updated its scenario of "break-down" for the title, from $ 97 to $ 10.

The best analyst price outlook, or "Bull deal", is $ 391.

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"Demand is at the heart of the problem. We believe Tesla may have oversaturated the retail market [electric sedans] out of China, "analysts at Morgan Stanley, led by Adam Jonas, wrote Tuesday.

And the revised "bearish" price is based on the assumption that Tesla will be half of China's Wall Street bank's sales forecast due to the "extremely volatile business situation in the region, especially around technology areas, which we believe tend to have high and increasing risk of governmental / regulatory attention, "analysts said.

Morgan Stanley also mentioned the departure of key executives, the recent price cuts on the Model S and Model X, and the decision of CEO Elon Musk last week to pursue a "fundamental" cost-cutting plan, depending on the symptoms of Tesla's growth "too big compared to near long-term demand.

In addition, Tesla's recent efforts to raise $ 2 billion in fresh capital – including Musk's $ 10 million purchase of Tesla shares itself – have also been seen as bad news on Wall Street. .

Fundraising "may provide an extra year of cash to run a business of this size and cash consumption," analysts wrote, but it is far from enough to offset the negative impact of the downturn. the market value of Tesla on employee morale and consumer confidence. (In this year up to now, Tesla shares have fallen by 40%.)

Last month, Tesla announced a worse than expected loss for the first quarter of 2019. Morgan Stanley predicts that Tesla could end the second quarter with a debt of $ 13.3 billion, or more than a third of its total market capitalization.