Coming up short…
Those might just end up being Tesla’s (NASDAQ: TSLA) famous last words.
With pressures escalating during what has to be one of the company’s worst weeks in its almost-15-year history, the electric car-maker is racing to manufacture and deliver as many Model 3 sedans as it can to appease its perturbed investors.
And it’ll still probably come up short…
The company’s share price dropped off by almost 8% on Monday, ahead of its quarterly production numbers announcement. This brought its losses so far this year to well over 20%.
But shares of the $50 billion venture have been hit with one thing after another this week. This includes concerns over the status of Model 3 production, an investigation into a fatal Autopilot crash in California, and worries over its debt load after it received a major credit downgrade by rating agency Moody’s.
Tesla has committed to building 2,500 Model 3s per week by the end of the quarter. This is in an attempt to reassure the market that it can meet targets, which the company has missed time and time again.
But no one’s convinced that the company will reach production targets this time either. And its stock has definitely paid the price for this doubt.
CEO Elon Musk first unveiled the Model 3 on March 31, 2016. But Tesla’s manufacturing woes have kept hundreds of thousands of consumers who’ve placed $1,000 deposits for sedans waiting for over two years.
Three Wall Street analysts said the company was likely to fall short of its own estimates again but might meet Wall Streets’ slashed expectations this time. Maybe.
A leaked internal memo to Tesla factory workers was initially reported by Bloomberg. It asked volunteers to come off the Model S and Model X production lines to help with the Model 3 production. The memo also encouraged volunteers to disprove the “haters” who were betting against the company.
Tesla’s failure to meet production targets, like for the Model 3 and liquidity pressures, prompted the downgrade by Moody’s last week, too.
Moody’s downgrade of the company’s corporate family rating fell to B3, six levels into junk territory, which sent Tesla’s unsecured shares falling to all-time lows.
The rating agency cited concerns about “the significant shortfall in the production rate of the company’s Model 3 electric vehicle” as a primary reason for the downgrade.
Musk made light of the company’s financial situation on April Fool’s Day. He joked in a tweet and corresponding picture that Tesla had gone “bankwupt” and had drunk too much “Teslaquilla”:
And the news of a fatal Autopilot-related crash and a displeased National Transportation Safety Board (NTSB) performing a corresponding investigation mark the cherry on top of Tesla’s bad news week.
Over the weekend, Christopher O’Neil, an NTSB spokesman, said the safety agency was unhappy with Tesla’s announcement that its Autopilot partial self-driving system had been engaged when a Model X electric crossover SUV crashed on March 23rd in Mountain View, California, killing the driver.
The criticism came in response to Tesla’s disclosure of the crash on the company’s website. It revealed that the SUV’s logs showed that the driver’s hands hadn’t been on the steering wheel for six seconds before the accident.
The company’s post didn’t say whether or not Tesla’s Autopilot system was at fault in the crash.
While professing the utmost respect for NTSC, Musk tweeted on Monday that the agency is an advisory panel and the National Highway Traffic Safety Administration (NHTSA) actually regulates cars.
He added that it would be “unsafe” for Tesla to delay releasing crash data affecting public safety.
Nonetheless, the preliminary accident results could prompt new safety concerns over Autopilot. There were already safety concerns about it last year in Florida when a Tesla Model S sedan crashed into a truck, killing the Tesla’s driver.
The spate of bad news sent Tesla shares down by 22.4% in March alone. This nosedive marked the worst-ever month for the stock and placed the electric-car company in bear market territory.
But despite Tesla’s bad news week, Efraim Levy, equity analyst at CFRA Research, said the firm would maintain its “hold” rating on Tesla’s stock.
In a note to clients on Monday, Levy said the “future of the vehicle electrification market” and an “eventual” resolution to vehicle production issues could be upward catalysts for shares.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today