Over the past week, shares of Tesla stock have surged more than 12 percent. However, a noted equity analyst believes there may be trouble for Tesla in the not too distant future.
The markets seemed to like some of the news coming from Tesla CEO Elon Musk this past week, which caused the company’s stock to rise three sessions in a row. First, Musk announced the company will start to use artificial intelligence that is customized to specific cars, and secondly, PepsiCo announced it will be reserving a fleet of 100 electric big-rig trucks produced by Tesla.
However, equity strategist Matt Maley from Miller Tabak has some serious doubts about the future of Tesla and the performance of the company’s stock in 2018. Here are some of the potential trouble spots that could hurt Tesla next year, according to Maley.
-Tesla’s Model 3 continues to experience production issues. Some Model 3s may not get shipped until 2019, which Maley says could allow Tesla’s competitors to catch up.
-Maley also says that Musk and Tesla will be forced to issue new debt next year. This new debt could hurt the company in the long-term, especially investors who buy Tesla stock for potential long-term gains.
-Maley believes Tesla stock could become vulnerable if the markets perceive that the company is weak. If there is a stock market correction, which some equity analysts believe might occur, Tesla could be one of the first companies to take a hit. Tesla does not have any meaningful short or long-term profitability outlooks, so investors may take the “flight to quality” route and invest in profitable companies during a market correction.
-Maley believes that Tesla stockholders should keep an eye on the $290 price point. In 2014, $290 was the company’s high, and once it reached that level, the stock saw several meaningful rallies. Maley suggests that investors should watch out for the stock breaking to the downside of $290.