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EIon Musk's Tesla Decelerates on 2 Speed Bumps: Time to Sell
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The much-hyped electric car company, Tesla, Inc. (TSLA - Free Report) saw its second worst month in March. Its share price tanked 22.4% in the month, way wider than the 2.7% decline of the S&P 500. It also saw a somber start to April. On the second day of this month, Tesla’s shares tanked around 5%, landing just above $251, which marks a 36% decline from its all-time high of $389.61 reached last September.
So, what has led to the dismal show? The recent accident involving one of Tesla’s driverless cars and the slow rate of Model X production are two major factors acting against the stock.
The Fatal Crash
On Mar 30, Tesla’s Model X SUV was involved in a deadly crash on Highway 101 in California while the car’s Autopilot system was active. This raised concerns about the safety of passengers in such vehicles. Many even questioned whether drivers are required to monitor the automated system in some form.
The US National Transportation Safety Board (NTSB) said that it will investigate the crash. It also said that Tesla could have taken additional measures to prevent misuse of the system. NTSB Chairman Robert Sumwalt added that Tesla Model S was also involved in a crash that claimed the life of a driver using autopilot in May 2006.
Model S Recall
Tesla, in the meantime, is recalling 123,000 Model S vehicles because of an issue related to a power steering component. The electric automaker had sent an email to customers, explaining that it has seen “excessive corrosion” in the affected vehicles’ power steering bolts.
Tesla added that “this primarily makes the car harder to drive at low speeds and for parallel parking.” Even though Tesla said that such a problem is mostly seen in “very cold climates,” it will recall all affected vehicles regardless of climatic conditions.
Market Pundits Stance Negative
In such a gloomy period, chief executive Elon Musk’s effort to make light of Tesla’s anguishes by joking on Twitter hasn’t gone down well with analysts. He had said that “despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it.”
Moody’s has trimmed the company’s credit rating deeper into negative zone, while Deutsche Bank analysts expect Tesla to miss first-quarter production target for the Model S. Even Tesla bull, Romit Shah of Instinet, slashed his target price of Tesla shares from $500 to $420 citing production woes.
Tesla Stock Verdict
Tesla is under intense pressure to meet its production targets amid a large recall and a fatal Model X crash last month. To top it, The company has a negative trailing 12-month P/E ratio of 22.07, in contrast to the Automotive - Domestic average of a positive 10.32. This raises an alarm as negative P/E usually indicates losses for a company.
The company’s earnings in the current year, in fact, are expected to decline 19.2%, while the industry is poised to gain 3%. The Zacks Consensus Estimate for earnings has trended downward over the past 60 days, as estimates have fallen from -$4.91/share two months ago to -$7.00/share right now. If this wasn’t enough, Tesla has a Zacks Rank #4 (Sell).
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
EIon Musk's Tesla Decelerates on 2 Speed Bumps: Time to Sell
The much-hyped electric car company, Tesla, Inc. (TSLA - Free Report) saw its second worst month in March. Its share price tanked 22.4% in the month, way wider than the 2.7% decline of the S&P 500. It also saw a somber start to April. On the second day of this month, Tesla’s shares tanked around 5%, landing just above $251, which marks a 36% decline from its all-time high of $389.61 reached last September.
So, what has led to the dismal show? The recent accident involving one of Tesla’s driverless cars and the slow rate of Model X production are two major factors acting against the stock.
The Fatal Crash
On Mar 30, Tesla’s Model X SUV was involved in a deadly crash on Highway 101 in California while the car’s Autopilot system was active. This raised concerns about the safety of passengers in such vehicles. Many even questioned whether drivers are required to monitor the automated system in some form.
The US National Transportation Safety Board (NTSB) said that it will investigate the crash. It also said that Tesla could have taken additional measures to prevent misuse of the system. NTSB Chairman Robert Sumwalt added that Tesla Model S was also involved in a crash that claimed the life of a driver using autopilot in May 2006.
Model S Recall
Tesla, in the meantime, is recalling 123,000 Model S vehicles because of an issue related to a power steering component. The electric automaker had sent an email to customers, explaining that it has seen “excessive corrosion” in the affected vehicles’ power steering bolts.
Tesla added that “this primarily makes the car harder to drive at low speeds and for parallel parking.” Even though Tesla said that such a problem is mostly seen in “very cold climates,” it will recall all affected vehicles regardless of climatic conditions.
Market Pundits Stance Negative
In such a gloomy period, chief executive Elon Musk’s effort to make light of Tesla’s anguishes by joking on Twitter hasn’t gone down well with analysts. He had said that “despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it.”
Moody’s has trimmed the company’s credit rating deeper into negative zone, while Deutsche Bank analysts expect Tesla to miss first-quarter production target for the Model S. Even Tesla bull, Romit Shah of Instinet, slashed his target price of Tesla shares from $500 to $420 citing production woes.
Tesla Stock Verdict
Tesla is under intense pressure to meet its production targets amid a large recall and a fatal Model X crash last month. To top it, The company has a negative trailing 12-month P/E ratio of 22.07, in contrast to the Automotive - Domestic average of a positive 10.32. This raises an alarm as negative P/E usually indicates losses for a company.
The company’s earnings in the current year, in fact, are expected to decline 19.2%, while the industry is poised to gain 3%. The Zacks Consensus Estimate for earnings has trended downward over the past 60 days, as estimates have fallen from -$4.91/share two months ago to -$7.00/share right now. If this wasn’t enough, Tesla has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>