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Tesla's stock loses charge after Musk's battery pitch

Published 09/23/2020, 07:39 AM
Updated 09/23/2020, 12:16 PM
© Reuters. FILE PHOTO: Tesla managers demonstrate V3 superchargers on German research campus in Berlin

© Reuters. FILE PHOTO: Tesla managers demonstrate V3 superchargers on German research campus in Berlin

By Tina Bellon and Munsif Vengattil

(Reuters) - Tesla Inc (O:TSLA) shares slumped in early Wall Street trading as investors and analysts tried to make sense of Chief Executive Elon Musk's highly technical "Battery Day" presentation that set lofty targets but was hazy on near-term execution.

Tesla shares slumped 7.5% in early Wednesday trading, wiping out more than $30 billion in market value from Tuesday's close. Analysts and investors divided over whether Musk can deliver on his visions of novel, proprietary Tesla batteries that could make electric cars competitive with mass market, petroleum-fueled cars.

Some analysts praised Tesla's impressive technology, capacity and cost targets. But others said Musk's promises lacked substance and questioned the three-year timeline he outlined for delivering the promised breakthroughs. Musk acknowledged that some of Tesla's ambitious technology is proving "insanely difficult" to manufacture at high volume.

Investors had expected two big announcements from Musk: the development of a "million mile" battery good for 10 years or more, and a specific cost-reduction target - expressed in dollars per kilowatt-hour - that would finally drop the price of an electric vehicle below that of a gasoline car.

They got neither from the event, with Musk promising a $25,000 car three years down the line that would "basically be on par" with a gasoline car. Musk has promised such a car for years.

Analysts from Swiss banking group UBS said that promise came with risks.

"By the time (the car) arrives, there will be significant competition in the segment, from VW group, amongst others," the bank's analysts wrote in a note to clients.

Volkswagen (DE:VOWG_p) on Wednesday unveiled its latest electric vehicle, the ID.4 sport utility and said it would be priced to sell in the United States for thousands less than a Tesla Model Y SUV.

Tesla has yet to deliver a previously promised $35,000 Model 3 sedan. The lowest-range version of that car currently retails for nearly $38,000 in the United States, with narrow profit margins generally making inexpensive cars unattractive to automakers.

Analysts also criticized that it would take at least another year to see some of Tesla's battery innovations in production. Musk said the company was starting to ramp up the production of larger, more energy-dense cells at a California pilot facility, but acknowledged the process was not yet fully working.

At $305, the average target price among the 33 brokerages who follow the company is another $100 lower and several brokerages emphasized that expectations for what the company could deliver were already out of whack with reality as the global economy heads into a potentially long-lasting recession.

Morgan Stanley (NYSE:MS) said Musk had shown substantial progress, but also laid bare the scale of the task in front of the company.

"Elon can't do it alone ... Tesla needs help to get there," its analysts wrote, saying governments, suppliers, investors and engineering talent would have to support the company's mission.

Jed Dorsheimer, an analyst at Canaccord Genuity, said Tesla's challenges to scale batteries and manufacturing capacity at affordable rates showed Tesla was a modern day auto, rather than a tech company with high valuations.

Tesla's Battery Day did yield some positive reviews, however.

© Reuters. FILE PHOTO: Tesla managers demonstrate V3 superchargers on German research campus in Berlin

Analysts at Deutsche Bank (DE:DBKGn) said the three-year plan for achieving 56% reduction in battery costs could materially boost Tesla's volume and margin outlook. The brokerage moved from the sidelines to assign a "buy" rating on the stock, and raised its price target to $500 from $400.

Latest comments

isn't Deutche involved with all the scandals and scams. they have zero credibility. as far as Elon? people add SpaceX to Tesla value. its not technology company as the writer says. its a medocre car espoused by egotistical yuppies drinking the koolaid
Everytime they doubt Elon....he comes through.....patience is the key with this!
Everytime they doubt Elon....he comes through.....patience is the key
DB got it right. Time will prove that. The obvious is clear to all. What you see is not what it is, as they say. These run of the mill third grade analysts would soon bury their faces in sand. Trsla will be back to $500 a share before the end of the month,
Very well summed up article that indeed reflects the reality check that is about to come.
Tesla stock price dropped hard after Cybertruck unveil too.. once analysts fully digest battery day the stock will surge.
Dude... it's up like 1000% in a 12 month range. Chill.
look at p/e over 1000you weren't around during tech bubble.
Imagine thinking that strip mining the earth of finite rare minerals like lithium, nickel and cobalt to build luxury toys for upper middle class people to fee futuristic and special is going to save the planet.
the only path to sustainability is reducing consumption
Nobody knows how much or where rare earths are exploitable because they haven't been a problem. For decades "peak oil" meant the date reserves would be maxxed out, now the ocean of exploitable oil is only propped by state socialist cartels and geopolitical chaos, and the "peak" is market demand not supply. California, among other places, has rare earths reserves aplenty, and when exploration and extraction gets more sophisticated we'll find out how much more there is.
and what planet do you live on? we live in a consumer consumption based economy.
Oil companies are the one shorting billions en masse to delay the inevitable - to prolong $2.3 billion a day in oil sales within the U.S.
Elon threw the stone of truth into the dungeon of drunken oil and polluting car manufacturers and caused great circles of fear. :-)
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