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TheStreet Open House

Tesla (TSLA) Recovers After Fire Fears Extinguished

Stocks in this article: TSLA

NEW YORK (TheStreet) -- Telsa (TSLA) shares partly recovered from losses throughout the week after CEO Elon Musk eased fears on automobile safety. On Thursday, shares  plunged more than 12% since the beginning of the week, the dual effect of a rare analyst downgrade and a viral video of a Tesla car on fire which brought into question battery flammability.

On the company blog, Musk wrote, "The combustion energy of our battery pack is only 10% of the energy contained in a gasoline tank and is divided into 16 modules with firewalls in between. As a consequence, the effective combustion potential is only about 1% that of the fuel in a comparable gasoline sedan."

The footage, posted to YouTube on Wednesday, showed a Tesla Model S on fire, the result of a collision with a metal object on a Washington State highway.

On Tuesday, Tesla was downgraded to "neutral" by Robert Baird, with a price target of $187, citing execution risks.

In other Tesla-related news, the Palo Alto, Calif.-based automaker is in discussions with Samsung for the supply of battery technology to its line of environmental vehicles, reports Reuters. A Tesla spokesperson confirms the company is meeting with several firms to determine the best battery technology compatible with current and future Tesla models.

Shares of Tesla Motors Inc stock were up today by $7.67 (4.43%) as of the close of trading. By the end of trading, 14.33 million shares changed hands compared to its average daily volume of 10.55 million shares. The stock ranged in price between $172.65 to $181.18 after opening the day at $176.40 as compared to the previous trading day's close of $173.31. Overall, Tesla Motors Inc led the S&P 500 which was up 0.71%. 

TheStreet Ratings team rates Tesla Motors Inc as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate Tesla Motors Inc (TSLA) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for Tesla Motors Inc is currently lower than what is desirable, coming in at 30.28%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.52% is significantly below that of the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Automobiles industry and the overall market, Tesla Motors Inc's return on equity significantly trails that of both the industry average and the S&P 500.
  • Tesla Motors Inc reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Tesla Motors Inc reported poor results of -$3.70 vs. -$2.52 in the prior year. This year, the market expects an improvement in earnings ($0.59 vs. -$3.70).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 71.1% when compared to the same quarter one year prior, rising from -$105.6 million to -$30.5 million.
  • This stock has increased by 584.96% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in TSLA do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

Written by Keris Alison Lahiff.

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