Tesla hits the skids
Safety concerns sink the high-flying electric car maker after a battery fire was caught on YouTube.
Shares of Tesla, the high-flying maker of electric vehicles, fell sharply Thursday after a video showing one of its cars engulfed in flames appeared on YouTube Wednesday.
Though no one was hurt in the Washington state accident, which the Palo Alto, Calif., company said occurred after the Tesla Model S ran over a large metal object, it raised fresh concerns about the safety of electric vehicles. According to media reports, the fire started in the battery that powers the $70,000 sedan. This is the first Tesla vehicle to catch fire.
The stock, which has tumbled about 12% since the video appeared, closed Thursday at $173.25, down 4% even as some Wall Street analysts rushed to defend the company. Others urged investors to be cautious. Shares rebounded Friday by nearly 4%.
Analysts at Deutsche Bank told clients in a note that they "have confidence that this is an isolated incident that could happen to any vehicle." They raised their price target from $160 to $200. Wedbush analyst Craig Irwin echoed this sentiment, saying in a note that "we do not expect this to derail near-term Model S orders and delivery momentum." He raised his price target to $180 from $150.
Some analysts see trouble ahead for Tesla, however.
Analysts at Robert W. Baird reduced their rating on the stock from "outperform" to "neutral." Bank of America analysts reiterated their "underperform" rating, putting a $45 price target on the stocks.
Investors paid more attention to the negative comments Thursday. Tesla, which has surged more than 400% this year, is a momentum stock and expectations among investors are sky-high. Revenue for the current quarter alone is expected to skyrocket more than 962% from a year earlier. Failing to meet these forecasts, even by a little bit, could send shares of Tesla reeling.
Given the questions raised by the accident, the stock will continue to be volatile for a while.
--Jonathan Berr doesn't own shares of the listed stocks.
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