Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Cash, demand concerns overshadow Tesla's SUV launch

Published 03/15/2019, 01:45 PM
Updated 03/15/2019, 01:45 PM
© Reuters. FILE PHOTO: A Tesla logo is seen at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai

© Reuters. FILE PHOTO: A Tesla logo is seen at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai

(Reuters) - Shares of Tesla (NASDAQ:TSLA) Inc fell nearly 5 percent on Friday, as investors wondered if its unveiling of an electric sports utility vehicle would add to pressure on cash flow, while analysts worried the carmaker was not addressing slowing demand for other models.

Tesla, which introduced a cheap $35,000 version of its Model 3 sedan last month and is struggling to convince backers its business model works, on Thursday launched the "Model Y" compact SUV - built on the same platform as the Model 3.

"It seems to be another distraction tactic presenting a new model and (to) divert from the problems with the other cars, the production and the profitability," NORD/LB analyst Frank Schwope said.

None of the 30 analysts who cover Tesla cut their price targets or recommendations for its shares, but the slightly bleak response to the new launch underlines the ambivalence of some on Wall Street to the company after months of legal wrangling and social media outbursts by Chief Executive Officer Elon Musk.

Some Wall Street analysts had raised concerns that demand for the higher-priced Model 3 was slowing down in the United States, especially after a reduction in the federal tax credit this year.

"We believe that Tesla's original business model for the production and profitability of the 'affordable' $35,000 version of the Model 3 is proving to be very difficult to achieve," ratings firm Moody's wrote in a research note.

The launch of the Model Y also reignited worries that Tesla would need to raise cash sooner than later.

Two Tesla analysts, both known as Tesla bulls - Gene Munster from Loup Ventures and Ivan Fienseth from Tigress Financial Partners - said the company would likely need to raise money later this year.

Cowen & Co's Jeffrey Osborne, who has an "underperform" rating on the stock, also agreed.

"We believe the event was more of a capital raising effort and branding exercise," Osborne said in a client note. "We do not see the new Model Y igniting elevated demand or enthusiasm for the Tesla brand."

Tesla said it would debut a long-range Model Y next year with a range of 300 miles (482 km), priced at $47,000, as well as a standard version, priced at $39,000, in 2021.

Tesla has been cutting jobs and closing stores in a bid to make profits and expects a loss in the first quarter.

© Reuters. FILE PHOTO: A Tesla logo is seen at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai

Shares of the company were down at $276.06 in afternoon trading.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.