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Tesla stock drops after analyst claims cancellations are outpacing orders

An analyst made bold claims to investors about Tesla on Thursday, casting doubt on the firm's ability to meet production targets. (Justin Sullivan/Getty Images)

Needham & Co. analyst Rajvindra Gill downgraded Tesla's stock on Thursday, claiming in a letter to clients that nearly 1 in 4 of the carmaker's Model 3 orders have been canceled — with refunds now outpacing purchases.

What's the situation?

Gill called sales of the vehicles "lackluster," attributed to manufacturing delays, unavailability of the base model, and the expiration of a $7,500 tax credit. The analyst cast doubt on Tesla's ability of reaching its year-end production targets, and further called the company's capital structure "unsustainable."

Tesla denies the claims, with a Tesla spokesperson telling Reuters, "The notion that Model 3 cancellations are outpacing orders is unequivocally false." Shares of the company dropped roughly 3 percent on Thursday when Gill's warnings were circulated, but the price appeared to have almost entirely recovered by 2 p.m. ET.

Anything else?

Prior to Gill's analysis — several details of which Tesla disputes — company shareholders were already none-to-pleased with CEO Elon Musk, who received universal rebuke for a Twitter rant against one of the rescuers of 13 people stranded in a Thai cave in recent days.

Musk referred to the cave diver as a pedophile after the rescuer had criticized his efforts to assist in the mission. The executive later apologized via (you guessed it) Twitter, and the comments have since been removed.

Even before his outburst against the rescuer, a partner with major Tesla investor Baillie Gifford & Co. told Bloomberg, "We think  a time of quiet and peace is what is needed to work through these [production] issues. I think that it would be good to just concentrate on the core task."

Tech analyst and investor Gene Munster was less subtle in an open letter posted Monday "on behalf of investors who believe in you and your mission," telling the CEO: "Your behavior is fueling an unhelpful perception of your leadership — think-skinned and short-tempered."

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