Why Tesla's Shares Plunged

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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 skidding off the road today, falling as much as 15% in intraday trading after the company cut its full-year forecast.

So what: It should be little surprise that Tesla investors are upset today as the company slashed its full-year revenue forecast from a range of $560 million to $600 million to a range of $400 million to $440 million. The reason for the change was a slower-than-expected rollout of the company's Model S in the back half of the year. While the company had a target of around 5,000 Model S deliveries for the year, it's now looking for 200 to 225 in the third quarter and around 2,500 to 3,000 in the fourth quarter.

Now what: Bloomberg's coverage of the forecast change quoted auto-industry expert Alan Baum, who noted that Tesla CEO Elon Musk is extremely focused on quality and that Musk is "driving every vehicle off the line." That's impressive! For this Fool, Tesla is a bit too speculative to be a serious investment consideration right now. However, with a CEO who is that focused on making sure his company is delivering a top-quality product, it wouldn't surprise me to see Tesla be very successful over the longer term.

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The Motley Fool owns shares of Tesla Motors. Motley Fool newsletter services have recommended buying shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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  • Report this Comment On October 06, 2012, at 4:23 PM, irvingfisher wrote:

    Hmm. maybe elon should pay more attention to sales and marketing and leave the driving to the VPs.

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