Will Tesla (TSLA) Stock be Hurt Today by Falling Gas Prices?

NEW YORK (TheStreet) -- Tesla Motors (TSLA) shares are up 0.96% to $224.36 in trading on Wednesday after the electric vehicle manufacturer posted a detailed look at just how much range its different models get on a single charge.

The company has faced questions about how far its vehicles can travel on a single charge since it went public. Those questions have been rekindled since Tesla CEO Elon Musk announced last Friday that the company's Roadster 3.0 upgrade would have a range of 400 miles on a single charge, a range increase of 63%.

"Roadster upgrade will enable non-stop travel from LA to SF -- almost 400 mile range. Details tmrw. Merry Christmas!," Musk tweeted last week.

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The company's driving range chart showed that its four Model S variants have a driving range between 208 miles per charge for the Model S 60, to 270 miles per charge on the Model S 85 D.

However, some Wall Street analysts believe that falling gasoline prices may make Tesla's driving ranges irrelevant.

"According to data compiled by Edmunds, the automobile market research company, sales of light trucks and other "gas guzzlers" (my term, not theirs) are suddenly booming again. And sales of hybrids, electrics and other fuel-efficient vehicles have suddenly, er, tanked," wrote Brett Arends of Market Watch.

"From May through November, sales of hybrids and electrics slumped from 4.1% of the market to just 3.2%. Meanwhile trucks, vans and SUVs in November accounted for 55% of the market - their highest share since 2011," he continued.

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 a number of negative factors, 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. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and generally high debt management risk."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Automobiles industry. The net income has significantly decreased by 94.1% when compared to the same quarter one year ago, falling from -$38.50 million to -$74.71 million.
  • Net operating cash flow has significantly decreased to -$28.00 million or 127.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.60 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, TSLA's quick ratio is somewhat strong at 1.38, demonstrating the ability to handle short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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 has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 continued to lose money by earning -$0.71 versus -$3.70 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus -$0.71).
  • You can view the full analysis from the report here: TSLA Ratings Report
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