The bad news keeps rolling in for Tesla Inc (Nasdaq: TSLA). TSLA stock dropped 6.8 percent Thursday after investors learned that the GOP tax plan would eliminate a $7,500 federal tax credit that makes it easier to buy electric vehicles.
The news comes on the heels of Tesla’s major earnings miss and admission that there will be further delays in Model 3 production. All together, the turn of events pushed Tesla stock below $300 per share for the first time since March.
The changes to the tax code would go into effect after the 2017 tax year and potentially impact 2018 sales. While electric cars represent only a tiny fraction of total sales for Ford Motor Co. (F) and General Motors Co. (GM), Tesla’s entire fleet is electric.
Earlier this year, Tesla CEO Elon Musk said the tax break wasn’t helping Tesla much to begin with. In fact, Musk, who resigned from President Donald Trump’s business advisory council following the president’s decision to exit the Paris Agreement on climate change, said the credit was actually doing more harm than good.
“It’s almost like over the years there’s been all these sort of irritating articles like Tesla survives because of government subsidies and tax credits,” Musk said on Tesla’s second quarter earnings call. “What matters is whether we have a relative advantage in the market, and, in fact, the incentive gives us a relative disadvantage.”
Some Wall Street analysts are growing skeptical of Tesla given its ballooning earnings losses and inability to hit its production targets. Tesla had targeted a Model 3 production rate of 5,000 vehicles per week by December 2017 but said on Wednesday it now doesn’t expect to hit that target until late in the first quarter of 2018.
Morgan Stanley analyst Adam Jonas says there is too much risk in Tesla stock at the moment.
“Longer term, we continue to harbor serious concerns about the sustainability of Tesla’s competitive moat versus what we see as the inevitable encroachment from tech firms both in the U.S. and internationally that have superior access to capital and human talent and business models that can withstand substantial operating losses,” Jonas says.
Oppenheimer analyst Colin Rusch says investors should tread cautiously. “While we believe TSLA has the potential to become a transformative technology company and deliver outsized returns for investors, the company’s pace of growth, recent questionable decisions around capital allocation, and lack of disclosure keep us on the sidelines,” Rusch says.
Morgan Stanley has…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
