The TSLA stock’s decline comes after the company’s announcement of its all-electric Model Y sport-utility vehicle, the company’s lowest-priced SUV yet. Some investors may be disappointed with the fact that there weren’t any notable surprises at the event.
CFRA analyst Garrett Nelson said:
“We thought the unveiling was a disappointment and are seeing a classic ‘sell the news’ situation this morning.”
Earlier this week, Morgan Stanley analyst Adam Jonas cut his price target for the stock by $20, to $260, while Macquarie Research cut its price target for Tesla stock by $30, to $400.
Still, Tesla stock did rise ahead of Thursday night’s Model Y unveiling. Musk had said in a January conference call that the company would “probably see a higher sales volume of the Y than the Telsa Model 3.”
CEO Elon Musk dove into one of the hottest segments in the automotive market with the long-awaited debut of the Model Y at its design studio in Los Angeles on Thursday night. He said:
“It’s wild to think about, 11 years ago today we’d made literally one car. And a year from now we’ll have made a million.”
The electric-car maker’s stock fell by 5 percent to close at $275.43 a share Friday, further straining shares that are now down by 17.2 percent and have lost almost $10 billion in market value so far this year.
Tesla Backing Away From Tesla Network?
The mid-sized SUV could tap into a larger global market for crossovers, but some analysts wondered if the Y could impact demand for other Tesla models. Another pressing concern is federal tax credits, which are phasing out for Tesla this year.
As analysts come to realize that the Tesla Network is not arriving soon (or perhaps ever), they will definitely have to revise their price targets. Expect negative pressure on the stock.
Do not forget, a big part of Tesla’s growth story is built around the idea of the so-called Tesla Network, an autonomous vehicle service that Musk has claimed will compete with the likes of Uber and Lyft. Thus, the March 6 update of the Tesla website has actually removed all reference to the Tesla Network.
It looks like Tesla is quietly backing away from the grandiose Tesla Network claims, which could result in serious consequences for the company’s growth narrative, as well as its inflated share price.
On the other hand, Wedbush analyst Dan Ives is pretty much convinced that this is only a temporary situation. He said:
“As we had the opportunity to test drive the car, we were very impressed with the interior and feel of the Model Y on the road as it did not drive like a crossover SUV. This could be a major competitive advantage for Tesla. The total market for crossovers is massive. Over the next three years, the Model Y could make up 15 to 20 percent of overall unit sales for Tesla, and thus be a major shot in the arm for Musk & Co. going forward.”
Musk May Be The Main Reason For the Stock Loss
There are also suggestions that this big “stock crash” is directly related to it’s CEO’s behavior last few weeks.
As The Street’s analyst Anton Wahlman says, the biggest takeaway from the Model Y unveil event wasn’t at all the car itself. It was all about CEO Elon Musk and his demeanor, in combination with the nature of the event itself.
“Musk spent the vast majority of the presentation talking about the company’s accomplishments to date. He basically said, “Here is what I did, against all odds and all the naysayers.”
It was as if he was making a film for the History Channel — a documentary of how Tesla became a force in the industry and changed things way beyond the punching weight of such a relatively small entity. It’s the way he would like to be remembered. A legacy.”
It is true though that less than 90 days ago, Musk mortgaged his half-dozen homes to the tune of $61 million. That was followed by multiple layoffs at Tesla (and even one at SpaceX), capped with an awkward shutting down of the Tesla retail stores – followed a week later by a partial reversal of that decision.
Tesla’s chief financial officer and general counsel both left the company within a month of each other. The vice president of engineering, Michael Schwekutsch, did too.
So there is a question among several analysts and “people behind the scene”: Was Elon Musk giving somewhat of a farewell speech?