After a few fires hit Tesla Motors’ (TSLA) Model S, investors started to panic about the near term future of the stock. Concerns were building that the battery pack was too low to the ground and that this was being punctured too easily, leading to the trio of fiery crashes that have sent shares of TSLA plunging in recent sessions.
In fact, largely thanks to this issue and waning demand for the stock following a so-so earnings report, shares of Tesla Motors have entered crash territory, falling by nearly 30% in a month. The stock even fell below $120/share towards the end of November, representing a huge fall from its 52 week high that was at $194.5/share.
The company has started off December on a better note though, especially following the results of a German regulatory investigation into the issue. In the release, the German body found no manufacturer-related defects, and Tesla said that it was notified that the regulators were closing their investigation and would take no further action.
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Shares of the electric car maker soared followed this report, jumping by nearly 15.5% at one point during the day on volume that was roughly double the norm. Undoubtedly at least part of this bump was thanks to some short-covering, but investors do have to be feeling a lot better about Tesla following this news release.
TSLA also saw some good news on the analyst front too, as Morgan Stanley’s Adam Jonas reiterated his overweight rating on the stock. He also declared that the company was his top pick out of his 26 stock coverage universe in the automotive sector, further helping the bullish case for TSLA in Tuesday’s trading session.
Smooth Ride Ahead?
Investors should note that Tesla isn’t in the clear just yet though, as an investigation is coming from the U.S. National Highway Traffic Safety Administration, and Tesla’s response on a series of record requests from this organization is due by January 14th. Obviously if there is an issue with the U.S. investigation into the fire we could see a big slump in TSLA shares going forward.
Earnings estimates for TSLA have also been dropping like a stone over the past few weeks too, with the consensus estimate for the current quarter plunging to a loss of four cents a share from a 20 cent profit per share 90 days ago. Current year and next year estimates aren’t any better, while TSLA currently has a Zacks Rank #3 (Hold), so there may still be plenty of bumps along the way.
I find the German investigation results very encouraging for TSLA as some were calling for a recall of the Model S based on the few fires which had taken place. A clean bill of health from the Germans—who are pretty much known for their cars—has to inspire confidence in a lot of people, and should hopefully help to put this issue in Tesla’s rearview mirror, and boost the stock to the prices it was seeing a few months ago.
But what do you think?
Are the positive investigation results and the analyst optimism enough for you to feel bullish on TSLA once more? Or does TSLA’s run so far, and the looming U.S. investigation make you want to put the brakes on adding this stock to your portfolio?
Let us know in the comments section below!
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