Tesla Motors investors turn bearish as stock slumps
Elon Musk, CEO of Tesla Motors Inc., introduces the Model X car at the company’s headquarters Tuesday, Sept. 29, 2015, in Fremont, Calif. (AP Photo/Marcio Jose Sanchez)
Some investors are souring on Tesla Motors, long one of the favorite stocks on Wall Street.
Shares of the Palo Alto electric car company have dropped 22% from their three-month high of $282.26 on July 20 to close Friday at $222.69. In trading Monday morning, Telsa shares sliped another 1% to $218.50. Three analysts lowered their share price targets for the company over the last week.
They cited varying reasons. The automaker won’t deliver as many cars as it had promised this year. The price of its new Model X crossover looks to be higher than expected, causing buyers to cancel orders. The company is having trouble ramping up manufacturing of the new crossover.
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Tesla spokesman Ricardo Reyes declined to comment on Tesla’s share price and its expected pace of car deliveries.
“We don’t comment on speculation regarding stock price valuation,” Reyes said.
Brian Johnson, an analyst with Barclays Research, lowered his share price target from $190 to $180.
“Our fundamental difference with the Tesla bulls lies around the company’s ability to become a successful mass-market [automaker] — while the bulls believe Tesla will be the next Ford, we see many challenges ahead,” Johnson said.
Johnson said Tesla fumbled the launch of its Model X last month. Generally, automakers would expect a boost in the share price from such an event, but Tesla has fallen.
Tesla will now miss its guidance to investors about how many cars it will deliver this year, Johnson said.
Through the first nine months of the year, the automaker has delivered only 33,117 vehicles. But Tesla told investors it expects to deliver 50,000 to 55,000 cars this year.
Johnson said the slow Model X ramp-up also calls into question whether the automaker will be able to come out with its Model 3 electric compact sedan by the 2017 time frame Tesla Chief Executive Elon Musk has announced. That threatens the company’s ability to evolve into a mass-market automaker, he said.
Other analysts said the high price of the Model X could suppress sales.
Tesla has not provided exact pricing information. Musk has said the X would start at about $5,000 more than a comparably equipped Model S sedan, which would put the starting price at about $81,200 before federal and state electric car purchase incentives. The price could run much higher with options.
But Morgan Stanley Research analyst Adam Jonas said he estimates the price will be $25,000 more than the sales price of a Model S — “and easily $10k to $15k higher than we had expected.”
“Unless Tesla introduces significantly cheaper versions soon, we do not expect the company to deliver more than 20,000 units of Model X in 2016, particularly when considering an increasingly difficult environment for imported luxury vehicles into China,” Jonas said.
Still, Jonas remains among the most bullish analysts behind Tesla. He downgraded his target price to $450 — still more than double its current price — from $465.
Ben Kallo, an analyst at Robert W. Baird & Co., sliced his Tesla price target to $282 from $335 and cut his estimate for 2016 earnings per share to $2 from $3. Kallo also revised his rating to neutral from outperform.
Kallo voiced concern about Tesla’s ability to ramp up Model X production without hurting Model S manufacturing. Both are made at Tesla’s factory in Fremont, Calif.
He also said the “higher-than-expected price” of the crossover “could reduce the market size.”
A fourth analyst upgraded Tesla, but it was a backhanded compliment.
Efraim Levy of S&P Capital IQ has been telling shareholders to sell the stock. But by Friday he said the stock had fallen far enough so that it was OK to hold.
“We are not enthusiastic to buy at these levels,” Levy said. “But we are not saying ‘sell’ either.”
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