December 8, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of electric car maker Tesla Motors (Nasdaq: TSLA ) were shorting out today as investors sold off shares, sending them down as much as 13% in intraday trading after Morgan Stanley (NYSE: MS ) downgraded the stock.
So what: Morgan Stanley analyst Adam Jonas cut his rating on Tesla all the way from overweight to underweight, while knocking down his target price from $70 to $44. Jonas did have some optimistic comments on the company, including saying that it had "near-flawless execution" in terms of the pre-production of its Model S. However, Jonas dampened his view on the electric-vehicle industry broadly, saying that EVs are "not ready for prime time" and slashing his expectation for EV market penetration in 2025 from 8.6% to 4.5%.
Now what: As with all analyst views, the change in expectation does not alter the underlying fundamentals at the company. Rather, it's simply one person's view on the company's and stock's potential. Jonas' more dour view of the electric-vehicle market in general may be good reason for Tesla investors to revisit their assumptions for the company, but for Foolish investors, a quick trigger finger -- whether in buying or selling -- is rarely an asset.
Want to keep up to date on Tesla Motors? Add it to your watchlist.