Tesla's 'self-inflicted' woes make this analyst feel more cautious about the stock

By Emily Bary

Curiosity swirls around the company's product priorities; it's unclear if it will cancel its low-cost vehicle plans, for example

Tesla Inc. is dealing with a host of challenges - some of its own making - and that could keep its stock at bay, according to a Jefferies analyst.

"Most issues affecting core auto performance appear self-inflicted and should keep returns well below potential for the coming 24 months," wrote Jefferies analyst Philippe Houchois, as he cut his price target to $165 from $185 and maintained a hold rating.

See also: Tesla overtakes Coinbase as top holding of Cathie Wood's flagship ETF

Tesla (TSLA) is due to post earnings on April 23, and that report comes with "recurring questions about product priorities and leadership," Houchois added. He expects to see a heavily negative cash burn for the first quarter, though not enough to cast doubt on Tesla's ability to finance its projects.

Shares were off nearly 3% in morning trading Wednesday.

The company must contend with falling prices for used cars, along with interest-rate pressure, which has impacted affordability. And Tesla's Cybertruck remains only a "marginal" contributor.

Meanwhile, curiosity swirls around the company's product priorities. Houchois, for his part, is doubtful that the company will cancel its low-cost vehicle plans, as has been reported.

"The economics of 'Model 2' are certain to be challenging but abandoning it would repeat past mistakes of U.S. [original equipment manufacturers] giving up against foreign competition when Tesla has demonstrated an edge in manufacturing and Shanghai provides a unique low-cost base for a Western OEM," he wrote.

But while Tesla has teased a robotaxi announcement in August, Houchois isn't sure such a presentation would shed much light on "the timeframe and investment needed to render the technology and business model viable."

Read: Tesla shares rise after Elon Musk says 'robotaxi' to be unveiled in August

He noted that Tesla faces a potential governance crisis as well, since Musk has expressed interest in amassing 25% of Tesla's voting power.

See also: Can Elon Musk do 'whatever he wants'? Why moving Tesla out of Delaware may spook investors.

"Tesla should soon submit date and proxy statement for the 2024 [annual general meeting], which we expect will address Mr. Musk's request but also protect the integrity of Tesla and synergies between AI and vehicle hardware," he wrote. "A legal decision to invalidate previous CEO compensation and controversy around Board independence open the risk of changes, from management structure to potential break-up."

In Houchois's view, "Tesla's collective mission, achievements and drive are bigger than individuals."

-Emily Bary

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04-10-24 1026ET

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