One Reason Tesla (TSLA) Stock Is Trading in the Red

NEW YORK (TheStreet) -- Shares of Tesla Motors Inc  (TSLA) are lower by 0.31% to $248.08 in late morning trading Monday, after analysts at CLSA issued a negative note this morning saying challenges in China remain for the electric car maker.

Following the firm's checks in China, CLSA found that Tesla's sales pace has not improved despite its strategy shift. Analysts said inventories in China remain elevated.

The firm noted that Tesla needs to invest further in marketing to increase awareness.

CLSA's industry contacts stressed the need for Tesla to educate the Chinese consumer about electric vehicles and charging.

CLSA kept its "underperform" rating, citing concerns that challenges this year will limit upside potential in Tesla shares.

Separately,TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

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

  • TSLA's very impressive revenue growth greatly exceeded the industry average of 6.6%. Since the same quarter one year prior, revenues leaped by 51.5%. 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, TSLA's share price has jumped by 28.05%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 35.88% is the gross profit margin for TESLA MOTORS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -16.40% is in-line with the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness 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.
  • Net operating cash flow has significantly decreased to -$131.79 million or 317.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: TSLA Ratings Report

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