Monday hasn’t been good for investors in Tesla Motors Inc (NASDAQ:TSLA). Stock in the electric car maker has dropped by more than 9% since trading began this morning. The loss brings the company’s one month losing streak close to one-third of its value. Something is going wrong at Tesla, but there appears little to explain today’s loss directly.
Tesla Motors Inc (NASDAQ:TSLA) stock has lost value in recent weeks on the back of a couple of trends. The company’s stock was vastly overvalued to begin with. The company has not yet recorded an annual profit, and its recent valuation of more than $20 billion priced in an insane amount of growth. At those levels the stock was not likely to grow into its valuation for years to come. Investors appear to have had enough.
Tesla loss explained
Tesla Motors Inc (NASDAQ:TSLA) has disappointed on a couple of fronts in recent weeks. The company has suffered a couple of shocks to the perfect veneer of its Model S sedan, in the form of reports of fires in the vehicle, and its earnings failed to impress Wall Street. Those events, coupled with the insane valuation of the company’s stock, have precipitated the slide in the value of the company.
Jim Chanos has a new short target in his sights. Earlier this week, the hedge fund manager disclosed that he is betting against "legacy" data centers that face growing competition from the trio of technology giants, which have previously been their biggest customers. The fund manager, who is best known for his winning bet against Read More
As the end of the year approaches many investors have been selling out of Tesla Motors Inc (NASDAQ:TSLA) in order to lock in profits. On the institutional side, this sell-off has been happening for quite some time. Retail investors appear to be catching up, though it’s too late for some to recover their spend. Tesla Motors is trading at levels last seen in July.
Tesla story falling apart
The fires in the Tesla Motors Inc (NASDAQ:TSLA) Model S cars in recent weeks do little to change the safety record of the company. Each fire happened after the car was involved in a major accident. Each car warned its driver and likely helped to save their life. However, the Model S story has been damaged nonetheless.
Tesla Motors Inc (NASDAQ:TSLA) was a narrative stock with a single product. That means the company’s story was vested in the story of the Model S, the only car it sells. The Model S was wrapped in divinity in the first half of the year. It received unprecedented scores in car magazines and safety tests. The fires damaged the hero myth, and the narrative of the stock in the process.
There is no telling what value the market will decide is fair for Tesla Motors Inc (NASDAQ:TSLA). On its fundamentals the company could be trading well below $100 without breaking any rules. The downside risk is one of the reasons so many investors appear to be getting rid of their holdings.
Tesla Motors Inc (NASDAQ:TSLA) as a company is still healthy. It’s still making electric cars, and it’s still developing its range of products and its infrastructure. Tesla as a stock, however, is dangerously unstable. An 9% loss on any day doesn’t break the rules. There were plenty of days that stock finished 9% up on the way to $190.
Sign up for our free newsletter to never miss an article plus get our free value investing e-book!