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Investors Turning From Tesla After Record Losses

By Alex NewmanStock MarketsNov 03, 2017 12:14AM ET
www.investing.com/analysis/investors-turning-from-tesla-after-record-losses-200258012
Investors Turning From Tesla After Record Losses
By Alex Newman   |  Nov 03, 2017 12:14AM ET
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Investor’s stomachs are going sour on Tesla (NASDAQ:TSLA) Inc., the brainchild of tech billionaire and entrepreneur Elon Musk, after the company posted a record quarterly loss of $619 million. Stocks in the company have taken a hit following the disappointing results, and the company has a long way to go if it intends to win back the confidence of wary investors.

Delayed models mean plummeting stocks

For Tesla (NASDAQ: TSLA), whose brand is centered on their unique electric cars, the trouble in the market began brewing after its Model 3 was delayed. After the company pushed back its production targets for the Model 3 on Wednesday, investor’s confidence was shaken, with the company’s shares plummeting some 5 percent in a short period, down to $305.31 on Wednesday.


Tesla’s forthcoming Model 3 has already generated significant demand; some 500,000 potential clients have already lined up on a buying list for the opportunity to get their hands on one of the electric cars. Production realities, however, could put down hopes of future sales. Elon Musk originally promised some 1,500 Model 3’s would be ready by the end of the third quarter, but only a paltry 220 have thus far made it off the assembly line.


The gargantuan third quarter loss significantly exceeded Wall Street’s expectations, too; the company’s $619 million loss dwarfed the expected $496 million hit it most analyst expected it to take. Similarly, expected share losses of only $2.80 each were instead a more painful $3.70. Elon Musk’s electric endeavor could prove to repel investors in the short term if the company doesn’t shore up its results and start getting more serious about consistently turning a profit.

The auto-manufacturer of the future?

The future isn’t entirely bleak for Tesla, however. Should the company get its production team back on track and begin churning out Model 3’s with gusto, it could show a serious turnaround; its new model starts at around $35,000, a significant price cut from the Model S, which cost consumers almost $70,000. If Tesla can churn out large numbers of its cheaper models without cutting too fiercely into the quality of their cars, Elon Musk’s electric car gambit may yet stun critics again with its success.


Indeed, for Tesla to face any long-term success, the company should continue to shun the label of a luxury car maker, and move to make its electric, environmentally-friendly vehicles more of a standard in mainstream society. Elon Musk’s personal visions frequently wind their way around the heart of his businesses, and Tesla is no different; with consumer’s rapidly warming up to the idea of cheaper electric vehicles, Tesla’s future in the auto industry may just be getting started.


To achieve positive results in the future, however, Tesla will need to alleviate the panic that’s likely set in amongst its shareholders following the disappointing quarterly results. No company can dive into the deep end before learning how to swim, and Tesla’s ability to market its vehicles as a mainstream alternative to gas-powered cars will depend on its ability to scale down prices while keeping its vehicles in top shape.


Tesla’s dilemma with the Model 3 may be a result of bad forex trading strategies and the unique challenges facing that car, as well, as the battery production plant for it continues to struggle to get up and running at full capacity. Elsewhere, however, the company has shown remarkable progress; while the company delivered only some 2,500 vehicle in 2012, it recently delivered its 250,000th vehicle. Such impressive progress in such a short period of time – the company is only 14-years-old – could show investors that while Tesla is anything but a traditional automotive manufacturing company, its unique style can still deliver results. Given that the Tesla fleet has grown by a factor of 100 in five years, according to Musk, it could stand to reason that his lofty ambitions about making electric cars the norm aren’t entirely baseless. The Silicon Valley behemoth will need to bring in more meaningful quarterly results, however, if he intends to get investors rallied behind his bold endeavor for much longer. Tesla has a long road ahead of it before it can dominate the automotive market, and many hurdles in its way; the green-car maker’s savvy style and persistence in the face of challenges, however, could yet revolutionize America’s roads.

Investors Turning From Tesla After Record Losses
 

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Investors Turning From Tesla After Record Losses

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