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

Steph Willems
by Steph Willems

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]

Steph Willems
Steph Willems

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  • Varezhka I have still yet to see a Malibu on the road that didn't have a rental sticker. So yeah, GM probably lost money on every one they sold but kept it to boost their CAFE numbers.I'm personally happy that I no longer have to dread being "upgraded" to a Maxima or a Malibu anymore. And thankfully Altima is also on its way out.
  • Tassos Under incompetent, affirmative action hire Mary Barra, GM has been shooting itself in the foot on a daily basis.Whether the Malibu cancellation has been one of these shootings is NOT obvious at all.GM should be run as a PROFITABLE BUSINESS and NOT as an outfit that satisfies everybody and his mother in law's pet preferences.IF the Malibu was UNPROFITABLE, it SHOULD be canceled.More generally, if its SEGMENT is Unprofitable, and HALF the makers cancel their midsize sedans, not only will it lead to the SURVIVAL OF THE FITTEST ones, but the survivors will obviously be more profitable if the LOSERS were kept being produced and the SMALL PIE of midsize sedans would yield slim pickings for every participant.SO NO, I APPROVE of the demise of the unprofitable Malibu, and hope Nissan does the same to the Altima, Hyundai with the SOnata, Mazda with the Mazda 6, and as many others as it takes to make the REMAINING players, like the Excellent, sporty Accord and the Bulletproof Reliable, cheap to maintain CAMRY, more profitable and affordable.
  • GregLocock Car companies can only really sell cars that people who are new car buyers will pay a profitable price for. As it turns out fewer and fewer new car buyers want sedans. Large sedans can be nice to drive, certainly, but the number of new car buyers (the only ones that matter in this discussion) are prepared to sacrifice steering and handling for more obvious things like passenger and cargo space, or even some attempt at off roading. We know US new car buyers don't really care about handling because they fell for FWD in large cars.
  • Slavuta Why is everybody sweating? Like sedans? - go buy one. Better - 2. Let CRV/RAV rust on the dealer lot. I have 3 sedans on the driveway. My neighbor - 2. Neighbors on each of our other side - 8 SUVs.
  • Theflyersfan With sedans, especially, I wonder how many of those sales are to rental fleets. With the exception of the Civic and Accord, there are still rows of sedans mixed in with the RAV4s at every airport rental lot. I doubt the breakdown in sales is publicly published, so who knows... GM isn't out of the sedan business - Cadillac exists and I can't believe I'm typing this but they are actually decent - and I think they are making a huge mistake, especially if there's an extended oil price hike (cough...Iran...cough) and people want smaller and hybrids. But if one is only tied to the quarterly shareholder reports and not trends and the big picture, bad decisions like this get made.