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‘Code Red’ for Tesla: 80% Drop Forecasted as Stock Sinks to $192, a 30-Month Low

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By CCN: Within one month, the share price of the Tesla stock has dropped by a staggering 27 percent as it plunged below the $200 level for the first time since 2016.

The Tesla share price drops to $192

The Tesla share price drops to $192 for the first time since 2016 (source: Yahoo Finance)

The intensifying downtrend of the Tesla stock is said to have been triggered by a barrage of negative factors including CEO Elon Musk’s admittance of a cash flow issue at the company and the decline in the exports of its flagship models further fueled by the ongoing U.S.-China trade war.

Can Tesla Survive “Code Red” Situation?

Last week, Daniel Ives at Wedbush suggested Tesla, Musk & Co. are facing a code red situation as investors continue to express bearish concerns over the company’s margins, increase in competition in the global electric car market, and the firm’s financial stability.

He said:

With a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound.

Since Ives reaffirmed his bearish stance towards the short to medium-term performance of Tesla, the share price of the company has fallen from $211 to $193, to a level the market has not seen for nearly two years and a half.

Tesla has found itself some breathing room after a successful $2.7 billion capital raise and a $500 million loan from China, which could reduce the concerns of investors towards potential liquidity or cash flow issues.

But, with analysts at major financial institutions in the likes of Morgan Stanley and Citi becoming overwhelmingly downbeat regarding the near-term trend of the company, the Tesla stock may face difficulty in easing the pressure placed upon the stock.

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John Murphy, an analyst at Bank of America Merrill Lynch, for instance, said that the newly obtained capital of Tesla is not enough to eliminate his concerns about the company and the pathway towards profitability.

“Tesla’s $2.7 billion capital raise, along with a $500 million-plus Chinese bank loan, and potential cash from incoming Model Y reservations, are good steps that could put liquidity concerns about Tesla to rest (for now) and buy additional time for the company. However, Tesla‘s pathway to becoming a self-funding entity is still unclear. As such, we continue to question Tesla’s longer-term profitability, cash flow, and valuation,” said Murphy.

80% Drop a Possibility?

Amidst uncertainty surrounding cash flow and profitability, the downtrend of Tesla accelerated as the latest trade talks between U.S. and Chinese negotiations fell apart, primarily due to the lack of appetite of China to push for a comprehensive deal with strong industrial policy change requests by the U.S.

As CCN reported, Friedrich Wu, a professor at Nanyang Technological University in Singapore, said the current structure of the trade deal is simply not appealing to the domestic audience and that the Chinese people can “endure more pain” for the prospect of a compelling agreement.

Tesla has already committed a grand project in the form of a Gigafactory to the Chinese market. However, as tariffs on automobile exports rise to 25 percent, Tesla may be forced to raise the pricing of its flagship models like the Model S once again to the $80,000 to $100,000 range.

Itay Michael, a global markets analyst at Citi, said he foresees the share price of the Tesla stock plummeting to as low as $36 shall the cash flow issues at Tesla are sustained throughout the short to medium-term.

“Maintain sell/high risk as the risk/reward still appears negatively skewed despite the recent capital raise and stock pullback, mainly on lingering demand/FCF (free cash flow) concerns. Reducing estimates to reflect the recent capital raise, Q1 results/guide and our own inputs,” Michael noted.

The market capitalization of Tesla, which surpassed that of Ford at one point, remains at $34 billion, around $6 billion less than Ford’s current valuation of nearly $40 billion.

Too Early to Write it Off

Tesla did experience a poor start to 2019 due to a culmination of factors but its flagship Model 3 continues to boast popularity in key markets.

According to CleanTechnica, the Tesla Model 3 was the 3rd top-selling vehicle in California in the first quarter of 2019, after surpassing all electric car makers in Europe.

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NYSE files a trademark application for trading NFTs

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The world’s largest stock exchange may be planning to bring business into the Metaverse.

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Traders say $4,000 Ethereum back on the cards ‘if’ this bullish chart pattern plays out

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Global tensions that could trigger a correction in markets abound, but traders say ETH’s current setup could result in a swift return to the $4,000 level.

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CryptoPunks community reacts to the ongoing copyright battle between V1 and V2

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Although the collection is no longer deemed authentic by Larva Labs, its creators alleged sold 210 ETH worth of CryptoPunks V1 when the wrapped versions first gained traction.

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Binance.US is under investigation from SEC over trading affiliates: Report

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Binance CEO Changpeng Zhao allegedly has connections to two market makers buying and selling crypto on Binance.US.

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Boost Insurance unveils product covering against crypto theft from qualified custodians

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Boost Insurance, an insurance infrastructure-as-a-service platform, alongside go-to-market partner, Breach Insurance, a company that provides insurance technology and regulated insurance products for the cryptocurrency market, today announced the launch of Crypto Shield, an insurance product for cryptocurrency available to retail wallet holders.

Crypto Shield covers the theft of cryptocurrency while in the custody of a qualified custodian.

The Crypto Shield product allows individuals to purchase protection for their crypto wallets held by select custodians. In the case that the custodian is breached or suffers a social engineering attack resulting in lost assets, individuals insured under Crypto Shield can be reimbursed for the value of their policy.

Boost + Breach

While there is some commercial insurance available to cryptocurrency institutions, Breach envisioned Crypto Shield as a solution to the protection gap that currently exists for individuals holding crypto, securing a partnership with Boost to assist in bringing the Crypto Shield product to life.

Boost’s insurance infrastructure-as-a-service packages the necessary operational, technological, compliance, and capital requirements for new insurance programs into a white-label solution, enabling insurtechs like Breach to swiftly launch new lines of business.

“Boost’s deep expertise and insurance infrastructure-as-a-service platform, and Relm’s industry-leading crypto reinsurance capabilities, have positioned Breach to bring a highly complex insurance product to the market in a beautifully delivered customer experience.”
– Eyhab Aejaz, Co-Founder & CEO at Breach

To deliver that product in a seamless experience, Boost and Breach’s platforms connect via API, allowing Boost’s policy administration system to deliver back-end management for the Crypto Shield product. Breach’s customers are then able to purchase and manage every part of their policy and claims process, all from within Breach’s proprietary crypto insurance platform.

“With Boost’s infrastructure-as-a-service platform, companies like Breach can launch and deliver innovative new insurance offerings, at a fraction of the time and cost required to build a full-stack insurance program from scratch.”
– Alex Maffeo, CEO & Founder of Boost

In addition to powering the new product, Boost and Breach partnered to source and secure the necessary reinsurance backing from industry expert Relm Insurance Ltd. (Relm), underwritten by Trisura Specialty Insurance Company. Operating out of Bermuda, Relm is a capacity provider to the crypto sector with a track record of insuring companies across the ecosystem. Relm has recently been awarded an ‘A Exceptional’ Financial Stability Rating (FSR) by Demotech.

“Relm’s partnership with Boost and Breach to reinsure the US’s first cryptocurrency insurance product for retail wallet holders is a milestone in supporting the development of crypto and blockchain technologies.”
– Joe Ziolkowski, CEO at Relm

The post Boost Insurance unveils product covering against crypto theft from qualified custodians appeared first on CryptoNinjas.

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