Tesla Inc. (TSLA) remains under the microscope after Morgan Stanley released a note stating their worst-case (bear) scenario for the stock is now $10, revised from $97. The analysts attributed the stock decline to concerns on decreasing demand for its cars and the company’s overgrowth.
Tesla posted a $702 million loss for the first quarter citing issues with delivering vehicles overseas and logistical problems. Tesla delivered only 63,000 vehicles in the first quarter, down 31% from the fourth quarter of 2018.
“This is the year Tesla comes undone,” Scott Galloway, an NYU professor, tells Yahoo Finance On the Move. “This company could get cut in half. And if you didn't know it had been cut in half, you would look at it and go, ‘for an automobile company, it's overvalued.’”
Besides being overvalued, Galloway states Tesla faces “catastrophic senior level turnover,” with a CEO [referring to Elon Musk] that has “absolutely no control of his emotions,” and the “weakest board in America;” this, in Galloway’s words, adds up to a “sub $100 stock price.”
As for the future of Tesla, Galloway believes the car manufacturer will be acquired. “I think Tesla goes below $100 a share within 12 months,” Galloway states. “And I do think it gets acquired, because there's real brand value there.”
“You could see a lot of different people pulling out their pencils and saying at a certain point, at what point does Tesla become a really interesting arrow in their quiver?”
Why Apple would be interested in Tesla
An unlikely tech giant may be the perfect suspect, according to Galloway. “Apple (AAPL) is the premiere organization in the world for creating tech hardware, and you would argue that Teslas are premiere tech hardware. So, from a product standpoint, it makes sense.”
One may argue that Apple acquiring Tesla wouldn’t make sense, and to that, Galloway states, “they’re [Apple] not the kind of organization to buy a second brand. Now, does it become an Apple brand? An Apple car, at some point? You’re looking at a 10%-20% chance, so, a non-zero probability. But at the end of the day, there’s one core brand here, which means they’d be overpaying. So, overtime, they’d probably turn it into the Apple car.”
But would buying Tesla be a wise move? Galloway questions if the entire auto industry, when looking at margins, is a sound investment: “if you look at right now, I think the combined market cap of Ford (F) and BMW (BMWYY) is less than Uber (UBER). I think it gets much worse from here. But anyways, who has the money to buy a Tesla, even at $80.”
Despite all this, Galloway, a Tesla Model-X owner, believes the company “has played an important role in history.”
Galloway explains, [Tesla] “kind of woken the Germans and American car companies from their electric slumber.”
Taylor Locke is a producer for Yahoo Finance On the Move.