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 Is HTC the next BlackBerry? Carl Icahn Tweets Make or Break Apple Is Icahn the only person holding up Apple stock? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Oct 8, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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