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- Tesla shares slid Tuesday after Morgan Stanley lowered its price target for the second time in as many months.
- The electric car maker is facing a slower demand than expected by Morgan Stanley analysts.
- The company's report comes one day after Chief Executive Elon Musk responded to the Securities and Exchange Commission's request to hold him in contempt of court.
- Watch Tesla's trade live.
The convergence of volatile problems at Tesla has led Morgan Stanley to reduce its outlook for the second time in as many months.
The demand for Tesla's vehicles hit an "air pocket" that arrived earlier than expected by Morgan Stanley analysts, as the electric car maker plans to cut costs and lower vehicle prices .
This fundamental challenge, as well as the likelihood that Tesla will not be able to profitably carry out its activities in China's very important market, led analysts to reduce their price target from $ 283 to $ 260.
"At a high level, a number of recent events within the company raise questions in the minds of investors, including statements by Elon Musk and key leadership changes … now the decision to close stores and continue to downsize, "A team of analysts led by Adam Jonas wrote Tuesday in a note to investors.
They added: "We are not inclined to buy now because we do not believe we would be compensated for the amount of risk we are taking."
The new price target of the company implies a drop of 11% compared to Monday's closing price. In early February, Morgan Stanley lowered its price target from $ 291 to $ 283. Before February, the last time the company lowered its target, it was in May.
In addition, analysts expect Tesla's free cash flow to drop by $ 935 million from the $ 621 million expected in the first quarter. For the full year, free cash flow stands at $ 1.1 billion.
Morgan Stanley's report was released a day after Elon Musk, Tesla's CEO, responded to the Securities and Exchange Commission's request that he be found guilty of contempt for tweets whose The agency allegedly violated the terms.
Read more: MUSK DEPOSITS DEFENSE: SEC says it wants to violate its First Amendment rights, and its filing is "riposte and censorship"
Musk's attorneys claimed that one of his tweets about production figures was "unimportant" and claimed that the SEC was trying to expand the initial terms of its settlement and violate the law. from his client to freedom of expression.
In terms of deliveries – a key measure of the company's health – Morgan Stanley has reduced its forecast of first-quarter vehicle deliveries by 23 percent to 48,000 units. Musk said at the end of February that Tesla would likely generate no profit in the first quarter, contrary to its earlier predictions that the electric car maker would be profitable for "all quarters to come."
"The potential longer-term resolution of Tesla's story to approach nine years after its IPO might require a few more chapters," analysts wrote.
Tesla shares fell 6% this year.
Read more about Tesla's coverage of Markets Insider and Business Insider:
The case of Tesla's bull is on fragile ground
The last thing investors wanted was a "boxing match with the SEC": this is what Wall Street says about Elon Musk's latest battle with the SEC
According to the SEC, Elon Musk violated his settlement with the agency and asked a judge to convict him for contempt of court
Insider Markets
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