Tesla, Inc. (Nasdaq: TSLA) investors have been disappointed with 2018, which was supposed to be the year of the Model 3. A credit downgrade, a fatal Uber driverless vehicle accident and doubts about first-quarter production have Tesla’s stock down more than 21 percent in the past two weeks, and analysts say investors still have plenty of reasons to question the stock.
According to KeyBanc analyst Brad Erickson, the biggest factor weighing on Tesla stock is news that Uber and Nvidia Corp. ( NVDA) have suspended their autonomous vehicle testing after an Arizona woman was struck and killed by an Uber AV test vehicle earlier this month. Erickson says investors may now be reconsidering the timeline for AV technology.
In addition, investors are concerned that Tesla’s inability to hit its Model 3 production targets may finally be catching up with the company. Moody’s cited “significant shortfall in the production rate of the company’s Model 3 electric vehicle” when downgrading Tesla’s credit rating earlier this week. Moody’s lowered Tesla’s corporate family rating from B2 to B3, a rating corresponding to non-investment-grade speculative debt.
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Erickson says that, while plenty of things have gone wrong for Tesla this year, the stock is probably oversold.
“Based on our ongoing checks across the U.S. and conversations with the company, we believe the stock is likely oversold in the near-term,” Erickson says.
However, he does not see the dip as a buying opportunity just yet given all of the long-term risks surrounding the company.
“Setting aside our long-held, longer-term skepticism regarding Model 3 production, demand and profitability, which we have consistently highlighted since downgrading the stock at above current levels in July 2015, we maintain a longer-term view that investors are too optimistic around perceiving TSLA as the superior automotive innovator in the areas of manufacturing, batteries, software, AI and competition,” Erickson says.
Even after Tesla lowered its Model 3 production target from 5,000 vehicles per week to just 2,500 vehicles per week by the end of the first quarter of 2018, Deutsche Bank analyst Rod Lache says the company will likely once again come up woefully short when it reports first-quarter deliveries next week.
“The datapoints available to us suggest another miss,” Lache says. Deutsche Bank estimates Tesla is currently producing only 1,100 Model 3s per week.
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Deutsche Bank has a “hold” rating for Tesla. KeyBanc has a “sector weight” rating for TSLA stock.
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Tesla Stock Is Still Too Risky to Touch originally appeared on usnews.com
