Tesla (TSLA) Shares Crash on Analyst Downgrade, Competitors Gain

NEW YORK (TheStreet) -- Tesla (TSLA) shares took a dive on Wednesday, closing 6.2% lower at $180.95. The automaker was downgraded to neutral by wealth management company Robert Baird, which set a price target of $187. In the year to date, Tesla shares have gained 434.3%, prompting concerns of a bubble.

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

"We rate Tesla (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 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's return on equity significantly trails that of both the industry average and the S&P 500.
  • Tesla 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 reported poor results of -$3.70 vs. -$2.52 in the prior year. This year, the market expects an improvement in earnings (59 cents 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.


Ford (F) shares edged 0.12% higher to $17.21 as of market close, treading water on gains made on Tuesday. Ford shares were higher after September U.S. sales figures pleased markets with a 5.8% increase despite forecasts for a flat month. This marked Ford's best September since 2006 and the eleventh consecutive month of year-on-year sales increases. 

TheStreet Ratings team rates Ford as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate Ford (F) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated." Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.2%. Since the same quarter one year prior, revenues rose by 14.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 72.52% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, F should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 55.68% to $6,078 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.02%.
  • Ford has improved earnings per share by 15.4% 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, FORD MOTOR CO reported lower earnings of $1.42 vs. $5.01 in the prior year. This year, the market expects an improvement in earnings ($1.54 vs. $1.42).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Automobiles industry average, but is greater than that of the S&P 500. The net income increased by 18.6% when compared to the same quarter one year prior, going from $1,040 million to $1,233 million.

General Motors  (GM) gained 0.08% to $35.94 as of market close. The automaker moved lower earlier in the day, a hangover from worse-than-expected September sales released a day earlier, before paring losses.

General Motors experienced an 11% drop in September sales, despite estimates of a 4.2% decline.

TheStreet Ratings team rates General Motors as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate General Motors (GM) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had subpar growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GM's share price has jumped by 57.97%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $4,893.00 million or 24.12% when compared to the same quarter last year. In addition, General Motors has also modestly surpassed the industry average cash flow growth rate of 18.02%.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.


Toyota (TM) shares gained 0.27% to close at $127.66. Toyota's share price was boosted by Japanese September auto sales figures showing a 17% increase to 522,760 units.

TheStreet Ratings team rates Toyota as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Toyota (TM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, notable return on equity, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins." Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Toyota reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Toyota increased its bottom line by earning $6.46 vs. $2.19 in the prior year. This year, the market expects an improvement in earnings ($11.68 vs. $6.46).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Automobiles industry average. The net income increased by 55.8% when compared to the same quarter one year prior, rising from $3,638 million to $5,667 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Automobiles industry and the overall market on the basis of return on equity, Toyota has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Powered by its strong earnings growth of 55.65% and other important driving factors, this stock has surged by 67.76% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • Net operating cash flow has increased to $10,375 million or 17.83% when compared to the same quarter last year. Despite an increase in cash flow, Toyota's average is still marginally south of the industry average growth rate of 18.02%.


Honda Motor (HMC) also saw moderate gains, closing 13% higher to $38.27. The company reported September U.S. sales dropped 9.9% to 105,563 compared with the year-ago quarter. Year-to-date sales, however, are up 7.9% over 2012.

TheStreet Ratings team rates Honda Motor as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate Honda Motor (HMC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had subpar growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has increased to $3,066.12 million or 38.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.02%.
  • The debt-to-equity ratio is somewhat low, currently at 0.98, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
  • Honda Motor 's earnings per share declined by 25.0% 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, Honda Motor increased its bottom line by earning $2.17 versus $1.41 in the prior year. This year, the market expects an improvement in earnings ($2.41 vs. $2.17).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.2%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

Written by Keris Alison Lahiff.

More from Markets

Stocks Move Lower on Trade Fears and 4 Other Stories You Must Know Wednesday

Stocks Move Lower on Trade Fears and 4 Other Stories You Must Know Wednesday

Trump, China Trade, Target and Las Vegas Casinos - 5 Things You Must Know

Trump, China Trade, Target and Las Vegas Casinos - 5 Things You Must Know

Global Rally Stalls as Trump Doubts North Korea Summit, Questions China Trade

Global Rally Stalls as Trump Doubts North Korea Summit, Questions China Trade

Target Slumps After Q1 Earnings Miss as Comparable Sales Slow, Traffic Improves

Target Slumps After Q1 Earnings Miss as Comparable Sales Slow, Traffic Improves

Pound Slides as Inflation Slows, Doubts Grow Over Bank of England Rate Hikes

Pound Slides as Inflation Slows, Doubts Grow Over Bank of England Rate Hikes