Shares of electric car maker Tesla Inc. (NASDAQ: TSLA) dropped about 7.5% last week, cutting its year-to-date share price growth from 80% to around 64% and its 12-month gain to around 71%.
Partly that’s due to a doubts about the company’s ability to turn a profit. Analysts at Jefferies started the stock at the equivalent of a Sell rating, noting that they expect the company to lose money at least through 2020. Then there was the $30 million fine SolarCity agreed to pay for inflating solar installation costs.
CEO Elon Musk said the company would reveal its semi-trailer truck in October. That would have been a positive, except that analysts were looking to see the unveiling in September.
A further reason for the pullback in the company’s share price could be all the recent announcements of more investment by companies like Volvo, Mercedes-Benz, and BMW among others in some sort of electrified vehicle, whether hybrid, plug-in hybrid or all-electric.
Volvo expects to have all its 2019 model year vehicles incorporate some level of electrification, and BMW is looking for a similar level of electrification by 2020. Mercedes plans to have a fully electric portfolio of models by 2022.
Mercedes even announced an expansion of its Alabama factory and funding for a battery-making facility that will cost the German automaker more than $1 billion. The company also is planning to spend $1.8 billion on global battery plants.
This are serious investments by experienced rivals with access to deep pockets. Tesla has first-mover advantage, but it needs to ramp delivery very quickly to reach its target of 500,000 by the end of next year. If the company starts to walk back that target, the near doubling of its share price in the past year will begin to unwind.
And there are plenty of short sellers who think that is just what’s going to happen. Short interest has been rising since the end of June and reached 29.24 million at the end of August. That represents about 27% of Tesla’s float.
Shares traded down nearly 2% Monday, at $344.42 in a 52-week range of $178.19 to $389.61. The 12-month price target on the stock is $319.94, with a high target of $464 and a low of $155.