Tesla Forecast May Undermine Musk Legal Defense, JPMorgan Says

(Bloomberg) -- Tesla Inc. stood by its forecast for full-year deliveries on Wednesday, despite a sharp drop in quarterly car deliveries, a move that could end up being more significant than it appears.

Shares plunged as much as 10 percent in pre-market trading, to about $262 versus Wednesday’s close at about $292. The stock had already fallen more than 12 percent this year through Wednesday, while the S&P 500 Index has risen nearly 15 percent.

While the weak first-quarter delivery numbers have reignited concerns about slowing demand, JPMorgan analyst Ryan Brinkman noted that the reaffirmed guidance may undermine a tenet of Chief Executive Elon Musk’s legal defense against the U.S. Securities and Exchange Commission.

Brinkman is referring to Musk’s Twitter post from February, which said Tesla would build about 500,000 cars in 2019. The official forward guidance from Tesla at that time stood at 360,000 to 400,000, a level that was reaffirmed on Wednesday. The SEC has alleged that the February tweet violated a 2018 settlement, which required Musk to get internal approval for tweets that could contain “material information.” A federal judge will review the post later on Thursday.

“The now clear incongruence of CEO outlook statements with official company guidance may hurt the perception of management commentary, eroding investor confidence and potentially placing additional pressure on the shares,” Brinkman wrote in a note to clients. The analyst also said the first-quarter production and delivery numbers were substantially worse than expected, leading him to lower his price target on the stock to $200 from $215. Brinkman has the equivalent of a sell rating on Tesla.

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