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The Tesla Model 3 is displayed during a media preview of the Auto China 2018 motor show in Beijing on April 25, 2018.

Damir Sagolj/Reuters

Few companies have created such strong and divergent opinions across Wall Street as Tesla.

To the company’s biggest boosters, Tesla’s chief executive, Elon Musk, is a new Steve Jobs — out to revolutionize transportation and the way we consume energy, just as the Apple founder changed the computer and telecommunication industries.

Investors willing to back Musk’s vision have bought up the electric carmaker’s shares and debt, and helped make Tesla — which sold about 250,000 cars last year — a bigger company by market value than General Motors and Ford for much of the past two years. GM sold about 8 million cars in 2018, and Ford sold about 6 million.

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To those on the flip side of the argument, Tesla is not sustainable as a business. Mass producing cars is a costly, low-margin business that depends on selling many of them, they argue, and Tesla won’t be able to sell enough cars profitably to fund itself. They have placed billions of dollars in bets it will fail.

Lately, some of the investors who had long financed Tesla’s operations, and sent its shares soaring, have been souring on the company, and a consensus appears to be forming that the necessary demand for Tesla’s cars may not materialize.

In May alone, Tesla’s stock dropped about 21%. Since a December high, the company’s market value has been cut nearly in half and has fallen below that of Ford and GM for the first time in two years.

Of course, this is Tesla, and its share price is prone to big swings as sentiment changes. Just last fall after the company’s third-quarter results had offered some hope it could become consistently profitable, Tesla’s shares climbed back near their all-time high.

But now, it is not just the stock that is tumbling. The price of Tesla bonds has fallen, while the cost of insuring its debt against default has surged. The moves suggest a greater wariness about Tesla’s long-term fate.

The waning optimism around Tesla began this year. Musk warned of a difficult road ahead and announced price cuts, and the company laid off 7% of its workforce.

But the concerns flared after Tesla reported a first-quarter loss of $702 million at the end of April. Moreover, it said it had sold nearly one-third fewer cars in the first three months of the year, compared with the end of 2018. That drop-off coincided with the phasing out of tax credits to electric car buyers, which added to questions about demand for its cars in the United States.

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Still, Tesla was able to sell $2.7 billion in stock and convertible bonds to investors in early May. The money provides Tesla with a buffer in case its operations continue to stumble and consume large amounts of cash this year, but not much longer. In an email to employees, Musk said that the cash infusion gave Tesla only 10 months to become profitable at the rate it was burning through cash and that “all expenses of any kind” must be reviewed.

Perhaps the biggest concern is China. The country is Tesla’s second-largest market, and increasing demand there was central to Tesla’s sales goals. That makes the firm particularly vulnerable to the trade war between Washington and Beijing.

All of that helps explain why Wall Street analysts, as a group among the company’s biggest boosters, have become disenchanted with the stock. Last week, Brian Johnson, an analyst at Barclays, said Tesla was “stalling as a niche automaker.”

Adam Jonas, an analyst with Morgan Stanley, said in a worst-case scenario the stock could tumble to $10. (Its shares currently trade around $185.) Daniel Ives, a Wedbush Securities analyst, said Tesla faced a “code red situation.”

For Tesla, the shift is particularly troubling because the company depends on investor enthusiasm for its stock and bonds to fund its operations. It has returned to the financial markets repeatedly in the past eight years to raise money. As long as it is still burning through cash, it will have to keep going back.

So, where does this leave Tesla now? The company has a long history of disappointing Wall Street and falling short of its own forecasts, but investors have mostly been forgiving, mainly because a large number of them believed in Musk’s vision.

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But if Tesla continues to fall short of its promises, the current skepticism may only grow, and the next time Tesla needs money Wall Street may be less understanding.

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