TESLA set for worst month ever
Published: Mar 29, 2018 1:16 p.m. ET
Wall Street doubts Tesla will meet Model 3 production goals
Tesla Inc. shares drew closer to their worst week and worst month, dogged by growing concern on Wall Street about the Silicon Valley car maker’s ability to meet its production goals for the Model 3 and by a string of bad news that included a downgrade for its debt.
Tesla TSLA, +2.46% stock was on pace for a pair of record lows on Thursday — its biggest weekly decline ever, down more than 15% on the abbreviated week, and its biggest monthly decline ever, down nearly 26% in March. Markets are closed on Friday in observance of Good Friday. The stock was the third worst performer on the Nasdaq.
The declines also demolished Tesla's long-held outperformance over the S&P 500 index SPX, +1.19% on a longer view. The shares are down 6% in the past 12 months, versus 12% gains for the benchmark and 17% gains for the Dow Jones Industrial Average. DJIA, +1.08%
The rout extended to Tesla’s debt, with the company’s 5.3% 2025 bonds trading around 88 cents on the dollar to yield 7.47%, according to trading platform MarketAxess.
Moody’s Investors Service late Tuesday downgraded their rating on Tesla’s debt on concerns about the Model 3 production and a “liquidity shortfall.” The bonds’ recent action suggest that the market is looking for “more downside,” IHS analysts said earlier this week.
Read more: Tesla bonds join Tesla stock in the doldrums
“The whole world is watching Tesla,” analysts at Bernstein said in a recent note. The Model 3 was supposed to bring Tesla into the mainstream, and Tesla not only wanted to reinvent the car but also reinvent the production line with hyper-autonomation, the analysts said.
“We believe Tesla has been too ambitious with automation on the Model 3 line,” spending around two times what a traditional auto maker spends per unit on capacity, ordering “huge numbers” of robots and attempting to ignore auto-making history and automate final assembly.
“(Tesla) talks of two-level final lines with robots automating parts sequencing. This is where Tesla seems to be facing problems (as well as in welding & battery pack assembly),” the Bernstein analysts said.
See also: NTSB investigating fatal Tesla crash in California
Tesla stock also felt the pressure from news that Nvidia Corp. NVDA, +4.00% will temporarily suspend self-driving tests, following Uber Technologies Inc. fatal crash.Read More...