DETROIT (AP) — Shares of electric car maker Tesla Motors Inc. fell more than 6 percent Wednesday after the Wall Street star got a rare downgrade from an analyst who wrote that there's limited short-term upside for the company.
R.W. Baird analyst Ben Kallo downgraded the stock from "Outperform" to "Neutral," telling investors that while he's still bullish on Tesla's long-term prospects, the company has "significant milestones" during the next 18 months that come with risk.
THE SPARK: Kallo told investors that Tesla's milestones include the need to increase production and the introduction of the Model X SUV. "We believe solid execution on both of these fronts is already priced into the stock, and any hiccups in execution present stock price risk in the near to immediate term," Kallo wrote. Also, he has found that investor sentiment toward the company has shifted to neutral or slightly negative as investors believe the stock is now valued fairly. The change in investor opinion, he wrote, shows itself in a rise in the number of investors who are short-selling Tesla's stock. That's risen from 15.7 percent of the outstanding shares on May 31 to 17.8 percent as of Aug. 30. Kallo set a set a $187 one-year price target, and also told investors that completion of the company's nationwide fast-charger network, successful international expansion, and its battery technology could be opportunities for further growth. But Kallo said he believes many of the factors also are already reflected in the stock price.
A Tesla spokeswoman says the company doesn't comment on analyst research.
THE BIG PICTURE: Stock in the Palo Alto, Calif., company is among this year's appreciation leaders on Wall Street. It hit a one-year high of $194.50 on Monday and has risen over 430 percent since Dec. 31. Tesla, run by PayPal billionaire Elon Musk, sells just one car, the sleek $70,000 Model S. It has plans for a 200-mile range electric car that would cost around $35,000. The stock run-up came as Tesla posted a first-quarter net profit, its only quarter in the black since it was founded a decade ago. Also this year, the Model S tied with an older Lexus for Consumer Reports magazine's top test score in July, and the car recorded a high numerical score in crash tests done by the U.S. National Highway Traffic Safety Administration. Tesla also paid off a $465 million loan from the U.S. Department of Energy nine years early. But it returned to a net loss in the second quarter, due in part to a charge for paying off the loan.
SHARE ACTION: Shares of Tesla fell $12.20, or 6.3 percent, to $180.80 in late trading Wednesday.
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Original headline: Tesla Motors shares fall after analyst downgrade
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