Tesla's Stock To Sink By 80%: Analyst

Tesla stock cratered nearly 10% on Thursday as investors assessed the impact of the electric vehicle giant’s aggressive price cuts and what CEO Elon Musk calls an “uncertain” economic environment, Will Daniel reported for Fortune.

Photo Insert: While Tesla’s revenue jumped 24% from a year ago in the first quarter to $23.3 billion, net income went in the other direction, sinking 24% to $2.51 billion.

Tesla has slashed the prices of some of its most popular models six times this year alone in an attempt to spur demand amid rising competition in the EV market.

While Tesla’s revenue jumped 24% from a year ago in the first quarter to $23.3 billion, net income went in the other direction, sinking 24% to $2.51 billion. Price cuts also pushed the company’s gross margins down from 23.8% last quarter to 19.3%, well below Wall Street’s consensus estimate of 21.1%.

Musk’s comments about “stormy weather ahead” and Tesla’s latest earnings retreat have pushed the “venerable” stock even deeper into what David Trainer calls the “danger zone.”

He says investors are pricing in sales growth and margins that aren’t realistic. With competition heating up, Tesla shares present a “major downside risk.” He says he is serious when he warns of “downside,” arguing the stock could drop as much as 80% to just $28 even under “optimistic” circumstances.

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