Shares of electric automaker Tesla (NASDAQ:TSLA) dropped as much as 5% in Wednesday trading before retracing to close the day down "only" 4.5%. Multiple stories broke today affecting the stock, including:
- A report from Bloomberg confirming that Susan Repo, Tesla's corporate treasurer and vice president of finance, has left the company -- this following last week's loss of Chief Accounting Officer Eric Branderiz.
- A separate report from CNBC stating that Tesla "is manufacturing a high ratio of flawed parts and vehicles that need rework and repairs" -- as many as 40% of all the car parts it is producing -- which is making it "hard to hit production targets" and affecting employee morale.
- A Wall Street Journal article on how Volkswagen is moving to swamp Tesla in the electric-car market, with plans to introduce as many as 30 new hybrid automobile models and 50 all-electric cars coming to market over the next seven years, being churned out by as many as 16 new electric-vehicle production factories.
It's hard to know if investors were reacting to any one of these stories more particularly than the others -- or whether Wednesday's sell-off was caused by a combination of the continuous knocking and pinging of multiple bad news stories breaking in a series. (I rather suspect the latter.)
What is clear is that the broad picture being painted here is of a pioneering electric-car manufacturer stumbling as it attempts to ramp up production, and giving a well-heeled competitor on the other side of the ocean time to make up lost ground. You can see the effects of this picture on Tesla's stock chart.
With no profit to Tesla's name, investors have a hard time valuing the company on traditional metrics such as earnings. (Analysts think Tesla will earn a profit next year. Then again, they've said that before.) In cases like these, investors often default to valuing a stock based on sentiment, and the negative or positive tone of news stories and press releases about its prospects.
Today, that sentiment was undeniably negative, and it's having its effect on the stock price. Tomorrow, however, is another day. If the news turns brighter, I'd expect Tesla's stock price to turn greener.