Gordon Johnson is known for many of Tesla’s most ardent supporters.
As head of investment research firm GLJ Research, the Wall Street veteran has earned a reputation as Tesla’s biggest bearer over the past few years—and for good reason.
Johnson made pessimistic forecasts about Tesla since 2018, while he was still working as an analyst at investment bank Vertical Group. And during his time as head of GLJ Research, he was Discuss that “Tesla’s core business is losing money” and often give price targets much lower than Wall Street’s consensus forecast.
But the bet against Tesla is a difficult call until recently. Between April 2018 — when Johnson first gave Tesla a “sell” rating — and November 2021, when the electric-car giant’s stock skyrocketed 1900%.
However, that did not stop the analyst from sharing his bearish view. And with Tesla stock down about 67% in 2022, it’s been a solid year for Johnson.
But the former Lehman Brothers executive still believes Tesla stock will drop more than 80% to just $23 per share next year.
Tesla’s Growth Story—Including Plans Going Forward robot, battery storage system, electric pickup truckand other new revenue streams—a complete distraction from business fundamentals, he said.
“It’s just a car company: 95% of its revenue comes from selling cars, 5% from a loss-making energy division,” Johnson said. told CNBC on Thursday. “They’re just an auto company that’s built up so much capacity that they can’t sell.”
Tesla’s headwinds
Johnson outlined three key issues he believes Tesla is facing at the moment: demand, competition, and pricing.
In terms of valuation, investors still appreciate Tesla compared to its peers in the auto industry. The EV giant is currently trading at around 40x earnings, while Ford, GM and Toyota trading at 5, 6 and 10 times earnings respectively.
And in terms of market capitalization, Tesla also outperformed the competition, even after its stock price fell 67% this year.
“Tesla is currently valued at more than the next three major automakers combined, despite selling only 5% of the vehicles those automakers sold in 2021,” Johnson noted.
Johnson thinks that to be appreciated by the market like that, Tesla needs to show that it is growing quickly and sustainably. But he believes demand has become an issue, pointing to a price drop in Chinathe WEand Europe in the fourth quarter.
Johnson said companies don’t cut prices when demand is high, arguing that Tesla is using price cuts to help combat increased competition.
While Tesla has been the leader in electric vehicles in the US for years, Johnson believes the company has lost its technological edge.
“There are a lot of other cars out there that have the same or better actual range, better interior, faster charging… so you have to think about the competition,” he said.
Finally, Johnson argues that Elon Musk hurt Tesla’s stock by selling $40 billion in stock value and create drama in the media.
“Musk is endorsing all these far-right conspiracies on Twitter” he say. “He is alienating his main constituency of buyers…liberals who think electric cars will save the world.
The Bull’s Rebuttal
Even Tesla bulls admit that buying Elon Musk’s Twitter, next jokeand recently sell Tesla shares damaged the company’s prospects. But they still believe the long-term growth story remains intact.
Garret Nelson, an analyst at investment research firm CFRA, said in a December 15 research note that he believes Tesla stock could rebound to $225 per share in the next 12 months.
He argues that the company’s U.S. vehicle sales will increase next year thanks to federal tax credits for electric vehicles and the upcoming launch of Cyber Truck — which he says is “proud of a single… industry leading reserve orders.”
And Wedbush tech analyst Dan Ives thinks Tesla will hit $250 a share next year.
“We remain bullish on the long-term thesis for Tesla and believe the stock is oversold,” he wrote in a note to clients last week.
Ives argued that Tesla is “on track” to continue growing its electric vehicle sales, which he said “would be a sign of confidence for Tesla bulls.”
After Musk picked a new CEO for Twitter and refocused on his “golden baby” Tesla, Ives and Nelson believe the company’s stock will return to its old winning path.
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