Here's Why Tesla Was Down 12.5% in March

A plethora of headlines gave rise to concerns about the electric car maker's operations.

Lou Whiteman
Lou Whiteman
Apr 6, 2019 at 4:38PM
Consumer Goods

What happened

Shares of Tesla (NASDAQ:TSLA) fell 12.5% in March, according to data from S&P Global Market Intelligence, with the stock reacting to a whirlwind of company news including shifts in the way the electric vehicle manufacturer operates, a new model release, and ongoing uncertainty about the automaker's standing with regulators and its cash reserves.

So what

The Tesla news cycle goes so fast, it's hard to pin a month's stock move on any one news item, and March seemed particularly busy for the electric car maker. Tesla began the month by paying a $920 million convertible bond obligation in cash, leading to investor questions about the health of its balance sheet and its cash reserves that were compounded on March 12, when the company conducted another round of layoffs.

Tesla's planned Model Y driving away from a city skyline.

Rendering of Tesla's forthcoming Model Y. Image source: Tesla.

Tesla also announced, and then walked back, a plan to close its retail locations in favor of moving all sales online, and adjusted vehicle pricing. All the while, company CEO Elon Musk was embroiled in a dispute with the Securities and Exchange Commission over whether his tweets exaggerated the company's prospects.

The company also in March unveiled a new vehicle, the Model Y crossover SUV, though the announcement fell short of investor expectations.

Now what

The Tesla news machine didn't slam on the brakes just because the calendar changed. So far in April, the company has reported first-quarter deliveries that missed estimates by a significant margin and announced an over-the-air update to its Autopilot software.

Tesla is a company that inspires passion, both from bulls and bears, and the argument is likely to rage on until the company is either consistently profitable or out of business. The thing I'm most interested in seeing over the months to come is whether there's sustained demand for the Model 3 vehicles Tesla is producing.

We've heard a lot about the Model 3's initial strong reservations, but between the rapid-fire changes in strategy and the reports of cars sitting on lots, I remain skeptical there is enough demand for Tesla's current product lineup to alleviate concerns about the company's balance sheet.