Tesla sinks 10% after Battery Day falls short of hopes and endangers high-flying valuation

Tesla sinks 10% after Battery Day falls short of hopes and endangers high-flying valuation
  • Tesla shares slid as much as 9.7% on Wednesday after the automaker's Battery Day event on Tuesday missed expectations and led some to question the company's lofty stock price.
  • CEO Elon Musk unveiled new manufacturing processes designed to slash Tesla's battery costs and allow for the production of a $25,000 electric car in the next three years.
  • But the event lacked any news of the million-mile battery "widely expected" by Wall Street and Tesla shareholders, the Wedbush analyst Dan Ives said.
  • Ben Kallo, a Robert W. Baird analyst, knocked the company for a "lack of upcoming catalysts" and expressed concern about how demand would hold up during the coronavirus recession.
  • Watch Tesla trade live here.

Tesla tumbled as much as 9.7% on Wednesday after the company's highly anticipated Battery Day event on Tuesday failed to deliver and led some analysts to question the stock's 2020 rally.

CEO Elon Musk took the stage near the company's factory in Fremont, California, to lay out several innovations for Tesla's manufacturing and battery-production processes. The firm announced plans to produce a $25,000 electric vehicle in the next three years and revealed a top-of-the-line specification for its Model S sedan.

But the nearly three-hour event lacked some announcements sought by Wall Street analysts. Those hoping for the reveal of a million-mile battery were let down; the breakthrough "was widely expected," the Wedbush analyst Dan Ives said in a note.

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Still, he added, cost savings from the firm's new battery-cell technology "remains a foundational goal" that should lift Tesla above its competition.


Other firms described Tesla's lack of surprises as a letdown. The company's valuation already rested on expectations of cost-cutting and production innovations, the Robert W. Baird analyst Ben Kallo wrote in a note seen by Bloomberg. The Tuesday event ended without any near-term catalysts, he added, leaving investors and analysts "cautious about demand given the recessionary environment."

RBC, which holds an "underperform" rating on Tesla's shares, said the event "highlighted some near-term stagnation" in the price reduction of its current batteries. The company's next-generation cells are "ambitious," but won't deliver gains for years, the firm said.

For some, potential manufacturing hurdles overshadowed the battery breakthroughs. Credit Suisse expressed some doubt as to whether Tesla can ramp its production efforts without a hitch. The automaker "has a spotted history on manufacturing," and "its plan to ramp on new technologies won't be easy," the bank's analysts said.

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Tesla closed at $424.23 on Tuesday, up roughly 411% year-to-date. The company rocketed higher through the summer on a wave of retail-investor interest, leaving some on Wall Street wondering whether its share price sat at unsustainable levels.


The electric-car company has 24 "buy" ratings, 40 "neutral" ratings, and 26 "sell" ratings from analysts.

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