Shares of Tesla Motors, Inc. (TSLA) have been in reverse ever since the electric car manufacturer reported first quarter earnings results that showed a wider-than-expected loss. TSLA stock closed Friday at $214.93 and was down at one point to $208.11. Friday's close amounts to a decline of 10.73% from the prior-week's close of $240.76. As it stands, just in the past thirty days, TSLA stock has reversed almost 20%.
The Need to Prove Doubters Wrong
Tesla CEO Elon Musk has demonstrated he can compete with any other carmaker when it comes to producing sleek, high-tech, desirable automotive designs. He has yet to prove, however, that he can produce vehicles in high volume or at an attractive price point where he can meet consumers' demands and do so profitably. In other words, the proving ground has shifted. And it would seem, Musk has fallen prey to "the need to prove doubters wrong." (See also: Tesla Shares Surge After Beating Market Expectations .)
Last week, Musk proclaimed that Tesla would produce 500,000 cars in 2018, two years ahead of his prior forecast. And he raised the stakes even higher by promising to double the volume in 2020. “We are hell-bent on being the best manufacturer on Earth,” Musk said. But Wall Street isn't buying what he's selling, especially after the company just reported first quarter 2016 earnings results that revealed a wider loss due to production problems.
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Even if Musk could meet his production target, it would cost more money than Tesla currently has. Tesla is “a cash-hungry, start-up unicorn,” Barclays analyst Brian Johnson proclaimed last week. Johnson forecasts a 25% decline in TSLA stock. As of the most recent quarter, Tesla had a net debt position of $1.82 billion and an operating cash flow of negative $525 million. This means Tesla must raise plenty of cash to meet its aggressive production goals. How it plans to do that remains to be seen. (See also: Tesla Model 3 Launch Reminds Us to Sell the News. )
The Bottom Line
TSLA stock has declined 10.45% so far in 2016, compared with a 0.65% rise in the S&P 500 (SPX) index. Over the past twelve months, the shares have fallen some 5%, while the S&P 500 index has declined 1.10%. TSLA stock has a consensus buy rating and an average analyst 12-month price target of $220, implying a 2.3% rise from current levels.