Low gas prices are taking a bite out Tesla's stock price in the last six weeks.
The low gas prices that have been a boon for truck and sport-utility sales are taking a toll on fuel-efficient and electric vehicles… and the stock price of at least one company: Tesla Motors.
The Palo Alto, California-based automaker saw its stock close below $200 a share yesterday for the first time since mid-February at $197.81, which was down $6.23 for the day. The drop below $200 was tied, in large measure, to concerns about declining gas prices.
While the stock rebounded today, closing at $205.81, that doesn’t mean the impact of gas prices isn’t having a long-term effect. Tesla stock has been sliding steadily since the middle of November when it was in the mid-$250 range. This coincides with the time gas prices were in the early throes of their decline.
Additionally, it’s changing the view of the company in the eyes of the Wall Street analyst community. One of the company’s biggest advocates in the analyst community issuing a report suggesting the company will not sell as many vehicles as earlier predicted and a cut on its share price estimate.
Adam Jonas, auto analyst with Morgan Stanley issued a report today forecasting that Tesla will sell just less than 300,000 cars by 2020, which is 40% less than the 500,000 the EV-maker has been predicting. He also cut his production estimate by half to 400,000 units by 2028.
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Jonas believes the much-ballyhooed Model 3, which is supposed to be what moves Tesla into the mainstream of car buyers, will suffer the most due to the low gas prices. He doubts that Tesla will be able to price the Model 3 in the $35,000 range as many have been expecting. He’s now thinking the price could be closer to $60,000.
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“While nobody buying a Model S today (for nearly $105,000) is doing so to save on their monthly expenses, the longer-term story is far more dependent on the volume success of the Model 3,” he wrote in the note. “Oil price is a factor for Model 3.”
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Jonas dropped his price target on Tesla shares to $290 from $320, a 9.4% hair cut, but kept a buy recommendation on the stock.
The company’s founder, Elon Musk, hasn’t address the change in outlook, he said during the company’s last conference call that his concerns centered on meeting the demand for the vehicles the company currently sells and less so on potential demand for a product that isn’t yet available.
Elon is learning the hard way. He failed with the X and showed the world that it takes him twice as long to design a car than it took Chrysler, 20 years ago. And the X is a morph job. Tesla stock should be right around where Ford’s should be. $6.00
By the time the Model 3 and even the Model X are out, the price of oil will not be what it is today. What will it be? Who knows?
Yesterday’s Dilbert was a very amusing take on the value of “strategic forecasting”. Frankly, even given perfect knowledge today, you’re probably just as accurate predicting the future with a dartboard.
I doubt that most people buying an EV are doing so based on fuel prices as these cars cost significantly more than any possible fuel costs savings. Most of the sales are novelty and tree hugger sales, from what I have seen. That’s why investors are very cautious on recommending any stocks for EV companies as the risk is huge. Eventually the financial realities will appear.