Tesla Stock Price Loses Over 7 Percent Since Monday After A Post-Crash Recovery; Is A Correction Underway?

 @angeloyoung_a.young@ibtimes.com
on October 09 2013 1:47 PM
Tesla June 2013
Tesla Reuters

[UPDATE 4:25 p.m. EDT] TSLA closed down 3.41 percent to $168.78 on Wednesday. It's down 12.55 percent since Oct. 3, the day after the Model S fire incident south of Seattle despite recovering its loss on Monday. Is this a correction, jitters over the looming issues over government debt and the ongoing shutdown, or both? 

Original story begins here: 

Telsa Motors Inc. (NASDAQ:TSLA) stock was down Wednesday with no tangible reason to point to, such as an investment downgrade or another eye-catching accident, like the one last week that appeared to promulgate a much-anticipated correction in the overvalued stock.

It may be just that: a correction leashed to an overall downturn in the markets as Congressional members continue to hold the U.S. economy hostage to political wrangling days ahead of a deadline on the debt ceiling.

Tesla’s stock was down nearly 14 percent on Wednesday afternoon since its start of trading on Oct. 2, a day after a Tesla Model S struck debris on a highway south of Seattle and caught fire, leading to no injuries. What would have been a routine roadside car-fire incident had it been any other (nonelectric) vehicle was big news because EV batteries are becoming powerful enough to raise concerns over lithium-ion battery chemical fire risk.

The news of the accident, and the fact firemen said the fire re-ignited and got worse when water was applied, led CEO Elon Musk to insist the fire would have been worse in a conventional gasoline-burning vehicle. For his part, the owner of the vehicle said he had no concerns about the safety of Model S sedan.  

Speaking at a symposium at Stanford University on Tuesday, J.B. Straubel, Tesla’s 37-year-old chief technical officer and the brains behind the Model S’s software and electronics, said Tesla’s battery is surrounded by firewall protection that prevents battery fires from penetrating the cabin.

"The vehicle performed great," Straubel said of last week's accident.  “The driver of the vehicle was hugely appreciative."

Nevertheless, the fire incident does appear to have been the tipping point for a TSLA stock-price correction. Despite gaining back the loss since the accident by Monday, since the start of the week TSLA’s price has retreated to below $170 a share, a price it hasn’t seen since mid September. The last bearish analysts’ reports occurred before and on the same day of the crash, when Zacks Investment Research and R.W. Baird both downgraded the stock. Since then, no substantial news would point to the downturn the stock has seen since Monday.

If anything, the latest news would have normally boosted demand for Tesla’s stock. The company announced this week it’s offering the option of CHAdeMO DC quick charger compatibility, which expands the number of charging stations that a Tesla vehicle owner can use. As reported earlier in IBTimes, the Model S is the top-selling model in electric-vehicle-friendly Norway, and now Reuters reports that customers there are buying second-hand Teslas as a premium because of the waiting list. Also, MPG Car Rental – a Venice Beach, Calif.-based company – has become the second car rental agency after Hertz Corporation to offer the Model S.

With TSLA’s current volatility, we could see a complete rebound by the end of the week based on these developments. At the same time, it would be difficult to imagine the price maintaining the trajectory of the past six months that has seen it rise more than 300 percent. If you got in on the ground floor of this stock rise, you’re in a sweet spot. But institutional investors have been scaling down their ownership on the stock, indicating that retail investors are going to end up – as they often do– holding the bag on the correction.

Tesla has not announced the date of its third-quarter results release, but it’s expected in the week of Nov. 4, according to Thomson Reuters.

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