Investing.com - Tesla (NASDAQ:TSLA) fell sharply on Wednesday, as yet another broker offered up a bearish outlook on the electric automaker, warning the stock's steep decline could worsen.
Citigroup cut its price target on Tesla to $191 from $238 and said it sees an increasing chance that Tesla shares will drop more than 80% on concerns about the company's hefty debt load and free cash flow, sending its share price 4.5% lower. Tesla shares, trading at just under $196, are down 41% this year, nearly 18% this month alone.
The bank outlined three potential scenarios for Tesla's stock: a 40% chance of a worst-case scenario slump to $36, a 55% chance of a moderate-bull-scenario rise to $253 and a 5% chance of best-case scenario rally to $760.
Morgan Stanley a day earlier cut its worst-case forecast on the electric car maker's share price to just $10, citing burdening debt loads and potential weaker demand from China. Robert W. Baird also was negative on the stock on Tuesday.
The increasing concerns about Tesla, which burned through $1.5 billion in the first quarter, come as its cash burn continues to outpace the growth required to eventually turn the electric motor vehicle company into a self-funded entity.
Acknowledging the burning hole its balance sheet, which many believe impairs its ability execute its growth plans, Tesla recently raised up to $2.3 billion in new capital.
Despite the flurry of bearish notes on the electric automaker, there are some on Wall Street who are wary of suggesting that the sun is setting on Tesla.
"In our view, this could set up for a short squeeze in the coming days/weeks/ months should deliveries, profits/losses, cash flow/burn come in even slightly better than draconian expectations, or should (CEO Elon) Musk introduce another business venture and/or longer-term financial target that once again gets bulls excited about the story," Merrill Lynch said.