Tesla plunges to 2.5-year low after analyst who cut his price target for the 4th time this year warns it's facing a 'code red situation' (TSLA)

  • Tesla shares fell Monday after an analyst cut his price target on the stock in a report that followed a session of heavy selling Friday.
  • The Wedbush analyst pointed to a host of concerns around the electric-car maker, including an email that CEO Elon Musk sent to employees last week detailing cost-cutting measures.
  • Investors dumped the stock late last week after the National Transportation Safety Board said Tesla's Autopilot feature was engaged during a fatal crash involving a Model 3 in March.
  • Watch Tesla trade live.

Tesla shares fell Monday after an analyst cut his price target in a searing report, drawing on a host of issues the electric car-maker is facing. 

"We continue to have major concerns around the trajectory of Tesla's growth prospects and underlying demand on Model 3 in the US over the coming quarters," Wedbush analyst Dan Ives said in a note to clients late Sunday.

He added that 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."  

RELATED: Take a look at the Tesla Standard Model 3: 

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FILE - In this Feb. 9, 2019, file photograph, buyers look over a Model 3 in a Tesla store in Cherry Creek Mall in Denver. Tesla is shifting all of its sales from stores to the internet, saying the move is needed to cut costs so it can sell the mass-market Model 3 for a starting price of $35,000. The Palo Alto, California, company announced the change Thursday, Feb. 28. (AP Photo/David Zalubowski, File)
FILE- In this Feb. 9, 2019, file photo, a sign bearing the company logo is displayed outside a Tesla store in Cherry Creek Mall in Denver. Tesla’s top lawyer is leaving the company after only two months on the job. Tesla said in a prepared statement Wednesday, Feb. 20, that General Counsel Dane Butswinkas will return to a legal practice in Washington, D.C. He’ll continue to work for Tesla as outside counsel. No reason for the departure was given. (AP Photo/David Zalubowski, File)
FILE--In this Saturday, Feb. 9, 2019, file photograph, buyers look over a Model 3 in a Tesla store in Cherry Creek Mall in Denver. (AP Photo/David Zalubowski, File)
FILE--In this Saturday, Feb. 9, 2019, file photograph, buyers look over a Model 3 in a Tesla store in Cherry Creek Mall in Denver. (AP Photo/David Zalubowski, File)
Cars are driven past a Tesla showroom, as Tesla announces it would close many stores and its sales would now be online-only around the world, in west London, Britain, March 1, 2019. REUTERS/Toby Melville
A Tesla Model 3 car is displayed at the Canadian International AutoShow in Toronto, Ontario, Canada, February 15, 2019. REUTERS/Chris Helgren
A Tesla Model 3 car is displayed at the Canadian International AutoShow in Toronto, Ontario, Canada, February 15, 2019. REUTERS/Chris Helgren
SHANGHAI, CHINA - FEBRUARY 22: More than 1,800 Tesla electric cars, including over 1,600 Model 3 from the United States, arrive at Pudong Waigaoqiao Port on February 22, 2019 in Shanghai, China. Freight ship 'Morning Cindy' carrying more than 1,800 Tesla electric cars, including over 1,600 Model 3 from the United States, arrived in Shanghai on Friday. (Photo by Zhao Yun/VCG via Getty Images)
SHANGHAI, CHINA - FEBRUARY 22: More than 1,800 Tesla electric cars, including over 1,600 Model 3 from the United States, arrive at Pudong Waigaoqiao Port on February 22, 2019 in Shanghai, China. Freight ship 'Morning Cindy' carrying more than 1,800 Tesla electric cars, including over 1,600 Model 3 from the United States, arrived in Shanghai on Friday. (Photo by Zhao Yun/VCG via Getty Images)
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Tesla shares fell by as much as 7.5% Monday to their lowest level since December 2016. Ives cut his target to $230 from $275 a share, meaning he's still betting on a 17% rally from here. Less than a month ago, he had a $365 price target, making him one of the most bullish analysts on Wall Street. 

He and a cadre of other Wall Street analysts have drastically tempered their view of the stock in recent months as growth, profitability, and demand concerns have weighed heavily on Tesla.

Read more: Tesla analyst slashes his target again, and says everything you think you know about it is in question

Though Ives saw Tesla's announced capital raise earlier this month as a "smart strategic step forward," he's increasingly concerned over the company's "cash crunch" while building out its Shanghai factory and attempting to ramp Model 3 production.

And the revelation that Musk is urging employees to be cost-conscious with their company expenses — per an internal email leaked to the news media and confirmed by Business Insider — does not exactly inspire confidence, Ives said.

Read more: Elon Musk says in email to employees that new cost-cutting measures are the 'only way for Tesla to become financially sustainable' 

He added the firm has "continued concerns around Tesla's ability to balance this 'perfect storm' of softer demand and profitability concerns which will weigh on shares until Musk & Co. prove otherwise in terms of delivering solid results over the coming quarters." 

The report followed a session of heavy selling Friday.

Tesla shares closed the day down 7.6% after the National Transportation Safety Board said in a preliminary report that Tesla's Autopilot feature was engaged during a fatal crash involving a Model 3 in March.

Monday's decline brought the stock's 2019 losses to 40%.

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