Why Tesla's Stock Is Tanking

Tesla’s stock is down over 9.5 per cent after it reported a Q4 loss of $0.65 per share, which was wider than analysts expectations of a $0.53 per share loss.

Tesla also said that first quarter cancellations are likely to remain elevated as people with older reservations for cars will have to “configure their vehicles within a set timeframe or pay the higher price just like new reservation holders”.

While Tesla Motors said it expects to generate “slightly positive” net income in Q1 2013, some like Ryan Brinkman at JP Morgan are still sceptical on the stock. From Barron’s:

“While gross margin tracked slightly better than our model in the fourth quarter, we are unsure Tesla will be able to realise as great an amount of manufacturing cost savings, with inefficiencies continuing to be driven by premium labour, premium freight, and unabsorbed overhead costs.

“…Wednesday’s results will not change the big picture debates about the stock, and may even heighten concerns relative to order cancellations,” notes Brinkman, who sees above-average execution risk for Tesla.

Meanwhile, Bank of America’s John Lovallo downgraded the stock to underperform, saying he thinks demand for electric cars will be “tepid” until technology catches up and consumers don’t have to “pay a premium or sacrifice convenience”.

He thinks the stock is too expensive and has a price target of $30. He lowered his 2013 profit estimate to $0.10 per share, down from $0.30 per share.

Here’s a look at the beating Tesla’s stock is taking:

Tesla stock chart

Photo: YahooFinance

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