Tesla (TSLA) Stock Bursts Into Flames
Shares of electric automaker Tesla Motors (TSLA) tumbled last week, after video footage of a fire engulfing its top-selling Model S started to circulate on the Internet, raising safety concerns regarding its lithium ion battery packs. Despite the news, Tesla stock had already climbed nearly 500% over the past twelve months. Daily Chart
The fire, which occurred on a highway exit in Kent, Washington, has raised serious questions about the future of electric cars.
Tesla has stated that the fire was caused by a metallic object hitting a module in its liquid-cooled battery pack on the underside of the vehicle. It is protected by a long slab of metal. It is currently unknown if Tesla will issue a recall for vehicles or change the designs to compensate for the problem. A recall at this stage for Tesla would be extremely damaging, considering that it just started to prove its worth with the Model S. Major automakers who have suffered from major recalls include Ford (F
), which had to recall is Explorer for safety issues, and Toyota (TM
), which faced a massive recall between 2009 and 2011 for a wide variety of quality control problems. Tesla investors are now bracing for possible safety investigations, which often follow car fires. Two years ago, General Motors (GM
) was investigated for battery fires that started in its Chevrolet Volts after federal regulators conducted crash tests. Analysts believe that Tesla is likely to be scrutinized in the same way. However, due to the government shutdown, Tesla will be able to avoid that fate for the time being. Boeing (BA
) also faced the same problems earlier this year, when its cutting edge 787 Dreamliners, which rely heavily on lithium ion batteries, also caught fire. The Dreamliner was touted as a next generation aircraft which could dramatically cut fuel costs for airline companies. On the same day of Tesla's fire, R.W. Baird analyst Ben Kallo downgraded Tesla from "Outperform" to "Neutral," who stated that the company faces "significant milestones" over the next 18 months that could cause the stock to dip on any perceived weaknesses. Those milestones include Tesla's need to boost its production of the Model S and its upcoming release of the Model X SUV. Mr. Kallo currently has a $187 price target on the stock, dependent on the completion of the company's nationwide fast-charger network, international expansion, and improved battery technology. Although Tesla shares have surged over the past year and its revenue rose a whopping 1,420% year-over-year last quarter, the company is still unprofitable. Other News About TSLA Tesla in Talks With Samsung SDI for Battery Supply Deal
Will Samsung profit from its big deal with Tesla? Tesla Fire Shows Electrics Face Safety Challenges
Tesla's fire exposes major problems with electric powered vehicles. Other Stocks in the News In HTC, Apple and Samsung Claim Another Victim
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Published on Oct 8, 2013
By Leo Sun