The research house Nomura Instinet has slashed its rating on Tesla shares to neutral from buy on fears that Musk’s recent behavior is holding back the company.
“We have been one of the most bullish on TSLA shares since initiating coverage last October. … We continue to believe that Tesla could be a lot bigger than it is today," analyst Romit Shah wrote to investors in a note entitled “No Longer Investable Tuesday,” reports CNBC.
Read: Tesla stock falls after Musk drops go-private plan, but Baird analyst says it is ‘positive for all stakeholders’
“The issue though is the erratic behavior of CEO Elon Musk. During the second quarter, the switch seemingly flipped … We are worried that this behavior is tainting the Tesla brand, which in terms of value is most important.”
Shah also pared his price target on Tesla to US$300 from US$400.
Musk’s reputation has taken a hit over the last few months due to his engagement in tit-for-tat Twitter battles and his recent appearance on a live-streamed podcast with comedian Joe Rogan where he smoked marijuana, drank whiskey and wielded a sword.
Indeed, investors were put on edge in August after Musk proposed and then abruptly pulled the plug on a deal to take Tesla private.
The swirl of controversy now surrounding the automaker seems to have taken its toll on senior executives. Chief Accounting Officer Dave Morton announced last week that he would be leaving the company after just one month on the job due to the “level of public attention placed on the company”.
For every pessimist, there is an optimist, however, and Shah’s shift to downgrade Tesla shares follows a move by Baird analysts to label Tesla a “Fresh Pick” on the view that its strong fundamentals will “drive shares higher”.
Despite the negative headlines the company is seeing, Baird analysts Ben Kallo and David Katter feel that in the second half of the year, Tesla’s results could exceed estimates.
Tesla shares traded down 2.5% to US$278.50 in Tuesday’s pre-market session.