Why Should Investors Stay Away from Tesla (TSLA) in 2019

Tesla Inc (NASDAQ: TSLA) stock is trading in the red after the company missed analysts’ estimates for its fourth quarter results. The company earned $139 million, or 78 cents a share, in the quarter. Revenue in the quarter increased to $7.23 billion, compared with $3.29 billion a year ago. Adjusted EPS in the quarter came in at $1.93 versus the estimated EPS of $2.20. Bad news for Tesla have started to come in pretty regularly, and several analysts are giving a gloomy outlook for the stock.

Tesla Inc (NASDAQ: TSLA) is also experiencing problems amid lower prices on the Model S and Model X in China .Overall revenue is also getting hurt due to a lower-priced midrange version of the Model 3. In January, Tesla announced to lay off a whopping 7% of its workforce amid profit pressures. Elon Musk admitted in his email that Tesla has been going through the toughest time in its history.

Model 3 Creating Problems for Tesla?

Analysts also think that in order to meet the lofty goals for Model 3 production set by Elon Musk, the company’s other production lines are experiencing losses. Tesla had set a 5,000 per week goal for Model 3 production.

UBS Autos Analyst Colin Langan gave a “Sell” rating for Tesla stock after the Q4 report. The analyst said that Tesla’s fundamentals are showing signs of problems. He thinks that Tesla’s margin targets are too high, and the company’s revenue will be affected by the low-cost Model 3. Langan said that Tesla’s management comments also show that the demand might be slowing down. One of the top reasons for a bleak rating by Langan is the mass exodus of senior management at Tesla. During the Q4 earnings call, Tesla CEO Elon Musk announcement the retirement of the company’s CFO Deepak Ahuja.

Management Exodus at Tesla

After the announcement of the CFO’s departure, Goldman Sachs gave a “Sell” rating for Tesla. The firm said that the departure could create some uncertainty for investors. Goldman also sees a “less stable” path forward due to a sequential step-down in deliveries, working capital problems and convertible debt payments.

Tesla is also having extreme pricing issues, especially outside of the US. Recently, Craig Irwin of Roth Capital said that in Japan, Tesla’s battery cells cost more than most analysts think, which could make it impossible for Tesla to get to the $35,000 Model 3 any time in the next several years. Irwin also thinks that the fact that Saudi Arabia’s Public Investment Fund is cutting its stake in Tesla shows that the company is losing ground. Last year, Elon Musk had claimed that he had funding secured for the fund and as a result he planned to take the company private.

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Author does not have investment in stock discussed in this article.

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