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Why Tesla Stock Fell 2.6% in Premarket Session

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May. 21 2019, Published 9:01 a.m. ET

Tesla stock falls

Today at 7:03 AM EST, Tesla (TSLA) fell to $199.99 in the premarket session, down 2.6% from yesterday’s closing price. On May 20, the stock fell below the $200 psychological level for the first time since December 2016 and ended the session with a 2.7% drop for the day. Yesterday, Wedbush Securities cut its target price on Tesla to $230 from $275, citing Model 3 demand concerns in the US market, which drove its stock down.

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Morgan Stanley lowers bear case to $10

Earlier today, Morgan Stanley analyst Adam Jonas lowered his bear case valuation for Tesla stock to $10 from $97 earlier, Reuters reported. The popular analyst bases his argument on Tesla’s deteriorating debt condition and its “geopolitical exposure.” Jonas believes that the company is exposed to geopolitical tensions, which could hurt Tesla car demand in the Chinese market.

In January 2019, Tesla started the construction of its third Gigafactory in Shanghai, China. On May 2, the company announced that it is seeking to raise nearly $2 billion by offering new shares worth $650 million and convertible senior notes worth about $1.35 billion.

Investors continue to suffer

As of yesterday’s closing, Tesla stock was down 38.3% year-to-date. Its performance has been much worse than the 13.3% and 16.1% gains seen in the S&P 500 Index and the NASDAQ Composite index, respectively, in 2019 so far.

On Monday, Tesla’s Chinese market peer NIO (NIO) also posted its all-time low of $4.11 and ended the session at $4.25 with 3.9% losses for the day. In China, auto tariffs make it difficult for Tesla to compete with local electric carmakers, including NIO. A recent escalation in US-China trade tensions also poses a risk to Tesla’s plans to expand its Chinese market presence.

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