Tesla Stock Sells-Off From Highs On UBS ‘Sell,’ Third Downgrade In July


Tesla Motors, Inc. (NASDAQ: TSLA) stock sold-off on heavier than average volume today on news of the third analyst downgrade of the shares in the month of July. Today’s downgrade came from UBS, who, as MarketWatch reported, feels that Tesla will sell “fewer cars and stationary batteries than the company had predicted.” Jim Cramer, with the Street, calls the research the UBS call was based on “valueless.”

Pacific Crest and Deutsche Bank both downgraded Tesla stock earlier in July, fueling a sell-off that erased more than $3 billion of the firm’s market capitalization. After those downgrades, and subsequent sell-off, shares rallied right back to all-time high levels.

As of 3:00 p.m., Tesla shares were down $14.83, or 5.3 percent, to $267.42. This represents roughly $1.7 billion in market cap lost: not as severe as after the previous downgrades, which had already been recovered.

With today’s sell-off, Tesla stocks sit only 8 percent below its all-time high of $291.42. Tesla is expected to report second quarter 2015 earnings on July 29. Analysts expect the firm to post a loss of $0.60 per share, and, as is reflected in this month’s downgrades, these views has fallen from 90 days ago, when analysts’ consensus was for a loss of $0.03 per share: a huge difference.

TSLA sells-off on downgrade.

The problem may be that Tesla cars and batteries are simply not being met with the demand predicted by Chief Executive Officer Elon Musk and his team. That crude oil has lost 50 percent of its value over the past 12 months has not helped Tesla. Are electric cars still attractive with $40-a-barrel oil? How about $25-a-barrel oil? The future for Tesla is far from certain.

Tesla CEO Musk has never been one to back away from challenges. Starting multi-billion dollar companies appears to be a mildly amusing pastime for the South African enigmatic CEO. SpaceX and SolarCity Corporation (NASDAQ: SCTY) are two of Musk’s other projects. Though they they are separate companies, the Falcon 9 failure on June 28 did not help Musk’s image.

Though views have come down, the consensus among Wall Street analysts is for Tesla sales of $5.76 billion this year and $8.76 billion next year, representing year over year growth of 60 percent and 52 percent respectively. Estimates for 2016 range from $5.54 to $10.86 billion, which is markedly wide.

Tesla EPS reductions totaling 645.5 percent and 50.0 percent are forecast for the quarter just ended and the following. For the full 2015 fiscal year, analysts expect Tesla EPS to fall by 135.7 percent. For 2016, however, analysts expect Tesla EPS numbers to increase 6,840.0 percent. Even with recent analyst downgrades, this is a number that is sure to be attractive to market participants and no doubt goes to explain Tesla stock sitting just below all-time price highs.

A beat by Tesla management on July 29 has the potential to send Tesla stock to new highs once again.

[Musk Photo by Scott Olson / Getty Images, Tesla Photo by Ben Rushton / Getty Images]

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