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Just a healthy correction? No -- Tesla could be heading toward a 'death spiral,' strategist warns

12:00 pm ET September 9, 2020 (MarketWatch)
Print

Shawn Langlois

'It feels the current correction is going deeper. It might even wobble into a crash.'

That's Bill Blain, strategist at London's Shard Capital, painting a rather grim picture in his "Morning Porridge" note (https://morningporridge.com/the-morning-porridge/f/blain%E2%80%99s-morning-porridge-september-9th-2020-correction-or-what)for a stock he's been warning about, mostly wrongly, for years.

Yes, finally, it's a good time to be a Tesla bear.

"The fact that Tesla's massively overhyped bubble has now popped generates enhanced risks and downside momentum of their own making," Blain wrote, acknowledging that he'll be "bombarded" by trolls. "If Tesla stock doesn't stabilise quickly, the downside problems could swiftly cascade, accelerating the downward price into, perhaps, a death-spiral. "

He said that a market cap of $40 billion -- down from $307 billion, currently -- would perhaps make Tesla (TSLA) an attractive target.

"Leadership in battery tech, the value of the data it's acquired and marshaled for autonomous driving, and owning 20% of the growing EV market, might make it interesting as an expensive acquisition or as a partnership backdoor into EVs and meeting CO2 emission targets," Blain wrote.

Until then, he said that Tesla's biggest risk at this point could be Musk losing interest and focusing on any number of his other endeavors.

As it stands now, Tesla remains on Blain's "crisis list," where it was placed years ago alongside WeWork, HSBC (HSBA.LN) and, later, Boeing (BA).

"One gone, three down but not yet out," he said. "Let's see."

Blain is also bearish on the broader market, which was bouncing back on Wednesday after a brutal stretch of declines.

"It feels the current correction is going deeper. It might even wobble into a crash," he wrote, pointing to a "cataclysm" of troubling headlines. "Markets are likely to suffer more bad news as October marks rising unemployment and ongoing pandemic misery."

At last check, the Dow Jones Industrial Average was up more than 500 points, while both the Nasdaq Composite and S&P 500 were also deep in the green. Tesla was up about 6%.

-Shawn Langlois; 415-439-6400; AskNewswires@dowjones.com

(END) Dow Jones Newswires

September 09, 2020 12:00 ET (16:00 GMT)

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