Following the Autopilot controversy and the disappointing earnings report, Tesla could be heading south further based on its stock performance from the previous sessions and due to its pronouncement of $1.1 billion cash requirements in payments and planned expenditures.
Earlier today, shares of Tesla lost 0.16 percent to $224.55, extending the losses on Thursday. The American automotive company has a market capitalization of $33.33 billion. For this week, the stock plunged to zero level and failed to surpass the resistance of 225.00. Tesla remained volatile in the rest of the week.
Tesla Cash Requirements
Based on the filing of Tesla with U.S. Securities and Exchange Commission, it allotted $3.25 billion in primary sources of liquidity at the end of June which includes a public offering worth $1.7 billion in the prior month.
Tesla refunded around $678 million credit line in July and needed to repay $411 million of 2018 convertible notes for the coming quarter.
According to the company, they will be using substantial amounts of cash in connection with conversions of their 2018 Notes and they could pursue other actions to reduce their outstanding balance of convertible notes, which could require further outlays of cash.
The intended cash requirements will surely weigh on the stock.
Tesla’s Trivial Gain
For the last three months, the stock managed to move higher after CEO Elon Musk clarified that Tesla was working exclusively with Panasonic for Model 3 cells, erasing Samsung SDI on the scene.
Afterwards, Tesla touched $235.52 last June 8, and sent a hundred market value to Panasonic since it always has been about leverage, competition and diversity when it comes to the business partnership.
In 2014, the team-up between Panasonic and Tesla pulled the stocks higher as well. The same case happened when the automotive company bought a Michigan based auto supplier in the following year. Even the speculation that Apple could possibly buy Tesla caused a significant increase both in February and November 2015.
Last July 11, Elon Musk signaled that Tesla was working on Top Secret Tesla Masterplan Part 2. The market predicted the clarification of the deal between SolarCity and Tesla plus a possibility of getting involved with SpaceX' s Hyperloop.
In the prior month, the shares of Tesla fell as the investors questioned the value of the deal with SolarCity. Part of the uncertainty was the cost of the capital structure of SolarCity. However, M.J. Shiao, GTM Research's director of solar research said "Solar is growing, but there's some regulatory uncertainty that plays a role here. SolarCity in particular has been hit hard simply because they've missed their own targets and forecasts."
Meanwhile, the stock found it hard to recover as it got bombarded with the successive accidents involving the autopilot mode of Model S and Model X. And just a few days ago, another car crashed while on its self-driving mode in China. Although, the company claimed that it was the sole responsibility of the driver to maintain the control of the unit.
As seen on the graph below Tesla went down to 195.62, the lowest level for the last three months. It found a slight recovery at 234.66 during the expected grand opening of its Gigafactory 1 and before the settlement of the partnership with SolarCity .
Tesla’s Discouraging Trend
Moreover, aside from the stock price, the company seems to be challenged in terms of its bonds. Investors must take into consideration of the $920million of the company’s bonds maturing in 2019 and the 1.38 million maturing in 2021. The respective bonds have conversion prices $360 per share, relatively far from the standing of the stock.
Tesla failed to meet the initial delivery target of 80 000 to 90, 000for this year. For the second half, the company only signaled for 50,000 deliveries. The figures released were quite ambitious for the auto company taking into consideration of the tight competition in the market. Clearly, a lot of companies have been offering what Tesla has in the market. Electric vehicles and self-driving program have been out in the market for a while.
There has been a narrow growth of stocks, especially in the automobile sector, as the market remained volatile with the excess of liquidity caused by the central banks. For the last quarter, only Toyota had the lowest decline among the auto stocks. Investors couldn’t be blamed if they turn out to be skeptical towards the automobile market. There was no sign of huge improvement and yet almost all reflected losses from their earnings report. So yes, it is indeed a red flag for the autos these coming months.
On the other hand, investors must focus on the investment of Tesla in Model 3 and on its Gigafactory in the coming year for this can restore Tesla’s status, or else just put your money in the Treasury. No one can question the ability of CEO Elon Musk to put things together despite the poor performance of the stock.
Clearly, the tie-up plans of the automotive company affect the trend of the stock. Thus, without the any further announcement or indication of any investment activities, the company will probably stay low.
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