Take the Tesla Plunge: Automaker's Stock Plumbs Territory Not Seen in Years

take the tesla plunge automakers stock plumbs territory not seen in years

There must be more than a few half-grins among the cynical, perpetually grumpy denizens of Finance Twitter today. For the first time since late 2016, Tesla’s stock price opened below $200. Compared to the sky-high valuation the company’s enjoyed a year or two ago, Tesla’s sinking shares reflect the weight of reality.

Tesla needs cash. Years after it began building electric cars for the fairly well-off masses, the company’s actions in recent months stands in stark contrast to the rosy predictions of the past, and it seems people are taking notice.

When trading opened Tuesday, Tesla’s stock price sat at $197.75 — a steep climbdown from the $332.80 it ended 2018 with. The stock briefly dipped below the $200 market last Friday. Gone are the headlines touting Tesla’s wild market value that followed the stock’s precipitous rise in early 2017.

The company’s fall back to earth is the product of numerous actions and events that all add up to a picture of a company in trouble. A dismal deliveries report in the first quarter. A unexpectedly large loss on the heels of two consecutive profitable quarters. A bid to raise $2.7 billion through an offer of stock and convertible notes, with CEO Elon Musk telling employees the money raised will buy the company 10 months. Then there’s the rounds of layoffs, the move to an online buying model, and near-daily fluctuations in vehicle price.

Meanwhile, there’s a Model Y and a Shanghai Gigafactory to get off the ground. Oh, and an electric pickup truck. And a semi. And a roadster. Controversy continues to rage over the automaker’s Autopilot driver assist system, which an NTSB report says was turned on in the lead-up to a recent fatal collision.

As reported by the Los Angeles Times, Wedbush Securities analyst Dan Ives cut his price target for the stock on Sunday, dropping it from $275 to $230 and telling investors that Musk faced a “code red” over his company’s finances.

“There are dark clouds forming over Fremont,” he told the Times.

Morgan Stanley analyst Adam Jonas dropped his worst-case scenario share price to $10 from $97 recently, citing concern over the U.S.-China trade war, The Street reports.

“Our revised case assumes Tesla misses our current Chinese volume forecast by roughly half, to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention,” Jonas said. “We believe as Tesla’s share price declines, the likelihood of the company potentially seeking alternatives from strategic/industrial/financial partners rises.”

The cost of default protection for Tesla bondholders is also on the rise, Jonas notes.

Amid the financial storm clouds and Musk’s promise, earlier this week, to watch every penny of expenditure comes calls for young investors to ignore the fact that Musk is cool and says awesome, forward-thinking things, and pay more attention to the company’s balance sheet.

[Image: Tesla]

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9 of 55 comments
  • Ronnie Schreiber From where is all that electricity needed to power an EV transportation system going to come? Ironically, the only EV evangelist that I know of who even mentions the fragile nature of our electrical grid is Elon Musk. None of the politicians pushing EVs go anywhere near it, well, unless they are advocating for unreliable renewables like wind and solar.
  • FreedMike I just don’t see the market here - I think about 1.2% of Jeep drivers are going to be sold on the fuel cost savings here. And the fuel cost savings are pretty minimal, per the EPA: https://www.fueleconomy.gov/feg/PowerSearch.do?action=noform&path=1&year1=2022&year2=2022&make=Jeep&baseModel=Wrangler&srchtyp=ymm&pageno=1&rowLimit=50Annual fuel costs for this vehicle are $2200 and $2750 for the equivalent base turbo-four model. I don’t get it.
  • FreedMike How about the “Aztek” package? Wait, this car already has that…Said it before and I’ll say it again: they need to restyle the hind end on this car, stat.
  • Johnster "Vale" is the [s]cheap[/s] lower-priced performance version with black trim and stiff suspension."Mist" is the "DeLuxe" version with a bit more chrome and trim. (Sort of like the "Decor Package" option.)"Magentic" is the full-on Brougham treatment (in its current state) with more chrome trim than the "Mist" and all sorts of gimmicky electronic features inside. (Sadly, it will not include simulated landau irons or a vinyl covered roof, even as an option.)"Aurora" is the Oldsmobile of Cadillacs (sort of like the old Cadillac Calais). No, that's not right. It's the top-of-the-line model, sort of a "Grand Touring" version, with not as much chrome as the "Magentic" but all of the gimmicky electronic features and a stiffer suspension.
  • Drew8MR Why can't CARB leave hobbyists alone? Maybe lay off the low hanging fruit and go after the gross polluters. Bring back the rolling exemption.