"Given the 3,000 per week China Model 3 production expectations in a country that remains on lockdown, we feel a reset of expectations in Q1 is likely and thus needs to be reflected in the valuation."
Tesla shares fell a record 21% on Wednesday after more than doubling in a value in a month.
The reasons for the sudden and sharp fall could be multiple. After a record-breaking share price hike, investors may be profit-taking. If enough investors were to sell at once, it could lower the stock price dramatically, MarketsInsider reported.
Wall Street analysts pared back their enthusiasm on Wednesday (local time), with Canaccord Genuity downgrading the stock from “buy” to “hold”.
Analyst Jonathan Dorsheimer wrote that the coronavirus was a “clear headwind” to the ambitions of the Shanghai facility, which like other Chinese factories has been ordered to shut down by a government trying to curtail the outbreak. The coronavirus outbreak in China may dampen Tesla’s growth in the key region.
The US company had to keep its new Gigafactory in Shanghai closed after the Lunar New Year holiday due to government guidelines in place to contain the coronavirus outbreak.
“Given the 3,000 per week China Model 3 production expectations in a country that remains on lockdown, we feel a reset of expectations in Q1 is likely and thus needs to be reflected in the valuation,” he said.
The stock of the electric vehicle and solar panel maker had rocketed to nearly $900, up over 30% in just two days, making it worth five times what it was in June last year, when there were whispers of bankruptcy surrounding Tesla. It was worth more than General Motors, Ford and Fiat Chrysler combined, even though the big three automakers together sell more cars and trucks in two weeks than Tesla does in a whole year.
Musk’s business had announced in October last year a shock US$105 millon profit and CEO Elon Musk said a new Shanghai factory and Model Y SUV were ahead of schedule.
A Tesla executive in China cautioned on Weibo that Tesla’s deliveries in China in February would be delayed owing to the coronavirus disruptions. Tesla is also experiencing an “extraordinary slowdown in deliveries in Germany, the Netherlands and weak figures from Norway and Sweden, Forbes reported.
“What sent the stock from the high $500s to the high $900s, I believe, was management’s optimistic deliveries forecast,” said Forbes’ contributor Jim Collins.
“Almost a week later, it is even more clear to me that Tesla has zero chance of delivering 500,000 units in 2020. My forecast remains for 360,000 – 400,000 unit sales from Tesla in 2020.”
Jim Collins also revealed that he had bought shares of Musk’s company.
“As Tesla’s shares went bananas Tuesday, by some calculations registering the highest one-day dollar volume in US stock market history, such an opportunity arose. I took it,” he wrote.