Pressure Mounts for Tesla. “When we heard the recall news tonight we asked ourselves, do we still believe in the story?” By Todd Horwitz, Bubba Trading

 

 

Pressure Mounts for Tesla

With pressure escalating after one of the worst weeks in its almost 15-year-history, Tesla Inc. raced to manufacture and deliver its mission-critical Model 3 sedan to burnish the numbers it’s about to report to rattled investors.

Tesla’s Fremont, California, delivery hub was packed with people Saturday evening as the last hours of the quarter drew to a close. Red couches and tall white tables were set up outside, a DJ played music and a truck selling Vietnamese food was on hand. Behind the scenes, a company that’s struggled to figure out how to mass manufacture cars implored workers to get production on track and disprove their doubters.

“Tesla is testing our patience,” Gene Munster, a managing partner at venture capital firm Loup Ventures who’s been bullish on the carmaker, wrote in a report Thursday, after the company announced it would have to repair a power-steering issue with the Model S. “When we heard the recall news tonight we asked ourselves, do we still believe in the story?”

The skeptics are getting louder after last week. The electric-car maker led by Elon Musk came under regulatory scrutiny for the second crash this year involving Tesla’s driver-assistance system Autopilot, the latest of which resulted in a fatality.

Last week, Moody’s Investors Service downgraded the company’s credit rating further into junk, citing the combination of production issues and mounting obligations that could necessitate a more than $2 billion capital raise soon to avoid running out of cash.

Later in the week, Deutsche Bank analysts predicted Tesla would miss first-quarter production goals for the Model S, and Tesla bull Romit Shah, an Instinet analyst, lowered his target price on Tesla shares from $500 to $420 on production concerns. Tesla also announced the recall of 123,000 older-model Model S cars, due to a the potential for a steering-wheel bolt to corrode.

Keep those stops tight
Todd “Bubba” Horwitz

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.