Categories Consumer, Markets

Tesla’s stock takes a hit after downgrade and production changes

Tesla Inc.’s (TSLA) shares were down 4.2% in afternoon trade following a downgrade from RBC Capital Markets and production changes for some of its models. RBC analyst Joseph Spak downgraded the stock to underperform, which is the equivalent of sell, and cut his price target to $245 from $290.

Spak said in a note that the growth expectations are too high to justify current levels, let alone add to positions. While Spak believes that Tesla has long-term growth potential, he indicated that the current valuation considers lofty expectations and that a third of the current stock price is an “Elon premium.”

The analysts at RBC have pointed out that Tesla has been promising high levels of growth and innovation but the company has delivered only a fraction of the promised units and is barely making profits. They believe the company faces the challenge of delivering high volume at high ASPs/margins and has to do something about it soon.

Last Friday, Tesla said it was planning to lay off over 3,000 employees in order to cut costs. CEO Elon Musk said the company was looking to offer its Model 3 sedan at more affordable prices for its customers. Tesla has not yet been able to provide the Model 3 at its promised price of $35,000.

Tesla’s stock plummets on news of job cuts and lower Q4 profits

Musk also hinted that the company’s fourth-quarter profit would be slightly lower than third quarter levels. Tesla is set to report fourth-quarter results on January 30. The announcement raised concerns about the company’s ability to sustain itself.

Tesla has also reduced its production hours for its Model X crossovers and Model S sedans, according to a report by Bloomberg. These changes come after the company decided to stop selling the cheaper versions of these models and are part of the company’s efforts to improve efficiencies in its production lines.


We’re on Apple News! Follow us to receive the latest stock market, earnings and financial news at your fingertips.

Most Popular

Does Unity Software (U) stock has more room to run?

Last month, the IPO market was in a full swing. IPOs of Snowflake (NYSE: SNOW) and JFROG (NASDAQ: FROG) had an impressive opening day in September, the former creating a

PepsiCo (PEP): Steady snacking habits amid pandemic drive strong quarter for beverage giant

PepsiCo Inc. (NASDAQ: PEP) beat market expectations on both revenue and earnings for the third quarter of 2020. The company saw the momentum continue in its snacks business while the

Does the virus-driven boom make Electronic Arts (EA) a good investment?

With more and more people turning to virtual entertainment sources, amid the virus-related movement restrictions, video game publishers like Electronic Arts (NASDAQ: EA) are witnessing unusually high demand. Not surprisingly,

Leave a Reply

Your email address will not be published. Required fields are marked *

Add Comment

Viewing Highlight