Tesla hits the skids

Safety concerns sink the high-flying electric car maker after a battery fire was caught on YouTube.

By MSN Money Partner Oct 4, 2013 1:34PM
By Jonathan Berr

A picture may be worth a thousand words but in the case of Tesla (TSLA), a video can eradicate billions in market value.

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.Credit: © Bill Pugliano/Getty Images
Caption: The Tesla Model S Signature is shown during a media preview day at the 2012 North American International Auto Show

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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Tags: TSLA
2Comments
Oct 5, 2013 7:16AM
avatar
Buy a golf cart not as expensive, $70,000 commuter car for the rich Libs  to say Hey Look at Me ,I can maybe go 100 miles from my house but have to hurry home to re-charge if I don't catch on fire first!
Oct 4, 2013 3:09PM
avatar
It is not the first electric or fossil fuel car to catch fire.......nothing to see here......buy insurance and enjoy.
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