Tesla Inc (Nasdaq: TSLA) stock is down more than 20 percent in the past three months amid a number of negative media headlines related to missed Model 3 production deadlines, poor reviews for Model 3 performance and safety, Tesla corporate credit downgrades and bizarre behavior by CEO Elon Musk on Tesla’s earnings call.
Robert W. Baird analyst Ben Kallo says the negative media coverage has created a buying opportunity for investors, and Musk suggested on Twitter this week that the mainstream media is in the pocket of oil companies.
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Kallo says the string of negative headlines about Tesla in the past several months has resulted in extremely bearish investor sentiment. Negative investor sentiment is often a bullish contrarian indicator, and Kallo says most of the issues the media has pointed out about Tesla will have no impact on the company’s long-term future.
“Negative headlines have increased substantially in the past month and, in our opinion, increasingly immaterial reports have dominated news cycles,” Kallo says, according to CNBC.
Tesla has taken a lot of heat from Wall Street related to its consistent inability to hit its Model 3 production targets. While those missed targets may have hurt investor morale, Kallo says the important thing for long-term investors is that Tesla is making progress. He says Tesla eventually successfully ramped up production of the Model S and Model X after initial delays. However, Tesla is aiming to produce the Model 3 at a much larger scale than its previous two models.
Kallo says investors should be buying the dip in TSLA stock. “We think we have hit a peak in negative coverage/sentiment, and believe shares could appreciate significantly with execution, which should coincide with an improvement in sentiment,” he says.
While production delays are one thing, safety and performance issues with the Model 3 are potentially more troubling. Earlier this week, Consumer Reports opted not to recommend the Model 3, citing inconsistent braking, complexities in its touchscreen control system and performance quality issues including its “stiff ride, unsupported rear seat, and excessive wind noise.”
Following the report, Musk tweeted that Tesla “can improve braking distance” and “won’t stop until Model 3 has better braking than any remotely comparable car.”
On Wednesday afternoon, Musk blasted the “holier-than-thou hypocrisy of big media companies” in a series of tweets.
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“Anytime anyone criticizes the media, the media shrieks ‘You’re just like Trump!’ Why do you think he got elected in the first place? Because no ones believes you any more. You lost your credibility a long time ago,” Musk said.
Musk went on to say that journalists are under pressure from advertisers. “Tricky situation, as Tesla doesn’t advertise, but fossil fuel companies & gas/diesel car companies are among world’s biggest advertisers,” he said in the tweet.
Baird has an “outperform” rating and $411 price target for TSLA stock.
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Tesla Inc (TSLA) CEO, Analyst Lash Out at Media originally appeared on usnews.com
