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Cowen Just Cut Its Target on TSLA Stock Because Investors Have Elon Musk ‘Fatigue’

Source: franz12 / Shutterstock.com
Tesla (NASDAQ:TSLA) stock is sinking lower by about 8% today after Cowen lowered its price target from $790 to $700. Meanwhile, CEO Elon Musk announced this morning that the electric vehicle (EV) company will…

Source: franz12 / Shutterstock.com

Tesla (NASDAQ:TSLA) stock is sinking lower by about 8% today after Cowen lowered its price target from $790 to $700. Meanwhile, CEO Elon Musk announced this morning that the electric vehicle (EV) company will be laying off 10% of its salaried workforce. Musk also warned that he has a “super bad feeling” about the state of the economy.

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The CEO elaborated that the job cuts do not “apply to anyone actually buildings cars, battery packs, or installing solar” and that the “hourly headcount will increase.” Gary Black, managing partner at The Future Fund, believes these job cuts will total 5% to 6% of the company’s entire workforce.

Per CNBC, Tesla will “pause all hiring worldwide” and require employees to spend at least 40 hours per week in the office.

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This news in mind, let’s dive into the details of the Cowen price target drop.

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Cowen Lowers TSLA Stock Price Target

Cowen lowered its price target on TSLA stock, but the firm also maintained its “market perform” rating. A market perform rating is relatively neutral and implies that a given company will perform in-line with the S&P 500.

Analyst Jeffrey Osborne notes that some investors may be “growing fatigued of Elon” due to his activity outside of Tesla. The CEO frequently engages in Twitter (NYSE:TWTR) discourse on environmental, social, and governance (ESG) policies, politics and other hotly debated topics. Musk is also in the controversial process of acquiring Twitter for $44 billion. Osborne explained:

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“These distractions are hindering media coverage of Elon and Tesla by extension, which we see as a problem for a company who does not advertise.”

That’s not all. Osborne also says Covid-19 lockdowns in China have hurt Tesla’s delivery prospects for the year. For the second quarter, the analyst lowered his delivery estimate from 309,400 vehicles to 242,000, a 22% decrease. General buy-side estimates for Q2 deliveries are between 240,000 and 250,000 vehicles. Cowen also lowered its yearly delivery estimate from 1.35 million vehicles to 1.28 million, a 5% cut.

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Tesla operates its most profitable factories in China, so the lockdowns have especially hurt its profitability. Osborne believes this issue will be heightened due to Tesla’s ramp-up issues in Germany and Texas for the Model Y. As a result, the EV leader may face challenges in achieving its approximately 50% delivery growth target for the year.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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