Elon Musk and Tesla Motors have seemingly been on a roll lately, and the latest victory for the Gigafactory was a big one, sending stock prices soaring to new heights. Then on Monday, Tesla stock lost 10% of its value in a matter of hours, falling from about $280 a share down to just above $251 a share, and for no good reason. What gives?
If you’ve been paying attention to the market, then you’ll know that TSLA is among the most-shorted stock right now, with lots of analysts asking if the company isn’t way over-valued. Elon Musk even came out and said he thinks the price is “a bit high”, and Tesla’s debt underwriter Morgan Stanley has removed a previous prediction that set Tesla’s stock price at $320 per share. Prior to this correction though, Tesla shares had soared 25% since the beginning of August, and the company has been riding a wave of optimism despites reports of quality control concerns.
But take a step back for a moment, and you’ll see that Tesla is still a fragile company is its earliest and most vulnerable years. Production of the Model S will perhaps reach the 35,000 unit goal Musk set for the company, but there’s huge upcoming costs relating to the Gigafactory, which could cost between $5 billion and $6 billion. Even with the incentive package and Panasonic on board, Tesla is on the hook for billions of dollars worth of factory that may not produce the desired reduction in battery costs in the specified timeframe. The Model S was also excluded from the recent round of Chinese EV incentives, which could put a damper on Tesla’s plans for rapid expansion across the Pacific. There are also concerns regarding the Model X, which has the tough job of following up on the success of the celebrated Model S, and Standard & Poor has even assign TSLA “junk” status, warning investors to stay away.
Taking all of that into consideration, is a 10% downward correction really so outrageous? Today the stock rebounded solidly back to $260 per share by the end of yesterday, and there’s still plenty of reason to be optimistic about the future of both Tesla the company and TSLA the stock. Keep in mind that the stock price has soared to incredible heights from its $30 IPO, sou just have to be in it for the long haul.
Source: http://cleantechnica.com/2014/09/17/tesla-stock-drop-10-one-day/
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