Tesla sinks 7% after Battery Day falls short of hopes and endangers high-flying valuation

Tesla

  • Tesla shares slid as much as 7% on Wednesday after the automaker’s “Battery Day” event missed expectations and led some to question the company’s lofty stock price.
  • CEO Elon Musk unveiled new manufacturing processes on Tuesday set to slash Tesla’s battery costs and allow for the production of a $25,000 electric car in the next three years.
  • Yet the event lacked any news of the million-mile battery “widely expected” by Wall Street and Tesla shareholders, Wedbush analyst Dan Ives said.
  • Robert W. Baird analyst Ben Kallo knocked the company for a “lack of upcoming catalysts” and showed concern for how demand will hold up amid the coronavirus recession.
  • Watch Tesla trade live here.

Tesla tumbled as much as 7% on Wednesday after the company’s highly anticipated “Battery Day” event failed to deliver and led some analysts to question the stock’s 2020 rally.

CEO Elon Musk took the stage near the company’s Fremont, California factory to lay out several new innovations for Tesla’s manufacturing and battery production processes. The firm announced plans to produce a $25,000 electric vehicle in the next three years and revealed a new top-of-the-line specification for its Model S sedan.

Yet the nearly three-hour event lacked some announcements sought by Wall Street analysts. Those hoping for the reveal of a million-mile battery were let down. The breakthrough “was widely expected” from the event, Wedbush analyst Dan Ives said in a note.

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Still, cost savings from the firm’s new battery-cell technology “remains a foundational goal” that should lift Tesla above its competition, he added.

Other firms pointed to Tesla’s lack of surprises as a letdown. The company’s valuation already rested on expectations of cost-cutting and production innovations, Robert W. Baird analyst Ben Kallo wrote in a note seen by Bloomberg. The Tuesday event ended without any near-term catalysts, he added, leaving investors and analysts “cautious about demand given the recessionary environment.”

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Tesla closed at $424.23 on Tuesday, up roughly 411% year-to-date. The company rocketed higher through the summer on a wave of retail-investor interest, leaving some on Wall Street wondering if the company’s share price sat at unsustainable levels.

The electric car company has 24 “buy” ratings, 40 “neutral” ratings, and 26 “sell” ratings from analysts.

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