Battery trouble
The company also has seen a drop in its sales of environmental credits to carmakers.
Tesla’s stock plunges on news of a battery shortage and high research costs.
Tesla Motors shares plunged Wednesday after the electric car maker disclosed that a battery shortage was limiting sales and that it is spending heavily on research and development on new models.
Shares of the automaker closed at $151.16, down 15%, or $25.65. Tesla shares have been on a run for most of the year, rising about 400% before this reversal.
Some analysts have cut their price targets for the company and have told investors to sell the shares.
“We do not see a major potential near-term upside catalyst for the shares,” said Efraim Levy, an analyst at S&P Capital IQ, who has is- sued a sell recommendation.
He cut his target price by $10, to $140.
The company’s outlook was also hurt by a sudden plunge in the sale of what previously had been lucrative environmental credits to other automakers. The sale of such credits reached just $10 million in the third quarter, a fraction of the $51 million in the second quarter and $68 million in the first quarter.
Other automakers have increased their sales of rechargeable cars, lessening their need to purchase the zero emission vehicle credits required by regulators in California and other states.
The Palo Alto automaker on Tuesday posted a loss of $38.5 million, or 32 cents per share, in the third quarter. That compares with a loss of $110.8 million, or $1.05 per share, in the same period a year earlier. Now that it is delivering cars, revenue grew to $431 million from just $50.1 million a year earlier.
“On a positive note, revenues and operating cash f lows exceeded our forecasts, and we see Tesla expanding production capacity and expanding globally,” Levy said.
Tesla is spending heavily to develop the Model X crossover. Currently, the company sells only one model, the Model S luxury hatchback sedan. The Model X is expected to hit the market late next year. It also is working on a third-generation electric vehicle, which would be a mass-market car expected to sell in the hundreds of thousands.
For now, Tesla said it expects to sell about 6,000 of its Model S sedans in the fourth quarter, raising its total for the year to about 21,500 from 21,000.
Tesla could be selling more cars if not for tight supplies of the batteries that power its electric cars, said Elon Musk, the automaker’s chief executive.
The inventory problem should ease sometime next year because of a recent agreement reached with Panasonic Corp. that increases shipments, he said.
But the bottleneck raises a red flag for the automaker, said Brian Johnson, an analyst at Barclays Capital. Tesla is running into supply problems at a low level of production. It will need “substantial additional capacity” for its high-volume third-generation vehicle, he said.
Although investors hammered Tesla shares Wednesday, there’s still divided opinion on Wall Street over the company’s potential.
Craig Irwin of Wedbush Securities cut his price target to $205, well above where the stock is trading now, from a lofty $240.
Irwin is valuing the company based on its upside in the electric car market, especially the potential for the third model, which will be a small car and have a price tag of about $35,000, about
half the base price of a Model S.
“We see strong positives in Tesla’s credible path to longer-term battery cost reduction and the Gen-III vehicle target costs, and what we believe will be a receptive buying public willing to purchase EVs,” Irwin said.
He said that Tesla has a “multiyear lead over credible competition” that leaves it “well positioned” in the electric vehicle market.
Other analysts agree it is proper to value Tesla as a long-term growth company rather than another manufacturer in the mature auto business.
“With a technology advantage, desirable and differentiated products, and proven execution, we think we’re only scratching the surface of things to come,” said Elaine Kwei, an analyst with Jefferies, the investment house.