It's Becoming Crystal Clear to Me What Tesla Must Do
Tesla (TSLA - Get Report) shares were under big-time pressure again on Wednesday and the stock has fallen more than 10% this week. Shares of the money-losing tech and electric auto outfit have lost 23% since hitting an all-time high in June 2017. The latest rout has little to do with the downdraft that has descended on FAANG (Action Alerts Plus holding Facebook (FB - Get Report) , Amazon (AMZN - Get Report) , Apple (AAPL - Get Report) , Netflix (NFLX - Get Report) and Alphabet (GOOGL - Get Report) ) stocks this week. Nope, it's full-on Tesla being its ridiculous self. The National Transportation Safety Board said Tuesday it was investigating a fatal March 23 crash in California. Tesla then came out with a Tuesday evening blog post saying it doesn't know what caused the crash. Again, Tesla comes off as a company that has no clue what's going on when investors are paying handsomely to own a gem of a high-growth company. I tell you, the difference in leadership between a Tesla and recent homerun IPO Dropbox (DBX - Get Report) (good executive leadership and board) is marked. But the fun for Tesla this week doesn't end there. Moody's slashed its credit rating downgrade on Tesla on Tuesday. Buried in the report is this helpful nugget: "These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion. Moreover, if the company maintains its expected pace of expansion, it will likely need to raise additional capital during the second half of 2019." All of this stock-crushing news flow arrives days before Tesla will release what many expect to be a weak quarterly sales report. The reality on Tesla is this: Wall Street is showing signs it realizes Tesla is poorly managed from the top and will face severe financial hurdles in the coming two years. For Elon Musk, he may want to consider taking offers for the company before the stock is down 50% or more below current levels. Tesla needs big-time help to achieve its vision and stay out in front of the onslaught of hybrid and electric vehicles waiting in the wings from Ford (F - Get Report) , Mercedes, General Motors (GM - Get Report) , Toyota (TM - Get Report) and Honda (HMC - Get Report) .
I printed out a piece this morning I wrote several weeks back on the case for another $6 trillion market meltdown. You really get the feeling we are nearing a short-term end to the bull market and in that regard the piece I am now looking at on my desk is still quite relevant. Six factors that stand to push us into a deeper pullback: (1) peak optimism; (2) peak profits; (3) policy problems; (4) rising protectionism; (5) terrible price action in leading sectors like tech and financials; and (6) rising inflation and interest rates. Beware of the suckers rally. For the broader market to stage convincing rallies, the FAANG space will have to first stabilize and then quickly snap back 10%. I'm unsure of when that might happen.
It's one of those mornings. Here are several things on TheStreet's radar: (1) Be sure to follow TheStreet's @AndersKeitz @ScottGamm and @TomTerrarosa who will be live at the auto show on Wednesday. (2) Seeing several Wall Street firms defend a bullish posture on Action Alerts Plus holding Nvidia (NVDA - Get Report) after Tuesday's rout. Nvidia said it was suspending its self-driving car tests. But nothing we heard from Nvidia's big presentation suggested a less innovative company with a less brighter future. Watch this name on a pullback. (3) Facebook said Wednesday it will make its privacy settings easier to find. Umm, so what? Pre-announce first-quarter results and give us a sense of the second quarter and full year, guys. Until then, Facebook hasn't earned the right to have investors buy on the dip.
Is the new Lincoln Aviator hot? You're call.
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