Please ensure Javascript is enabled for purposes of website accessibility

Why Tesla Stock Got Dented Today

By Rich Smith – Dec 20, 2021 at 10:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A couple of headlines are weighing on Tesla stock today.

What happened

Shares of Tesla (TSLA 6.24%) suffered a minor fender bender Monday, dented by a pair of moderately negative news items.

Don't freak out. It's only a fender bender. The electric car stock is down 2.7% as of 10:10 a.m. ET, so only a bit worse than the 1.5% sell-off we're seeing on the Nasdaq Stock Market as a whole. Still, the news is worth noting.

Two drivers examine a fender bender.

Image source: Getty Images.

So what

Bad news item No. 1: Australia's Department of Infrastructure, Transport, Regional Development and Communications has announced a recall of 106 Tesla Model 3 sedans manufactured between 2019 and 2021. According to the department, a fastener attaching "the front suspension lateral link ... to the sub-frame ... may loosen over time [and] cause the lateral link to separate from the sub-frame," affecting wheel alignment and "vehicle controllability."  

Bad news item No. 2: Separately, and not related to the Australian recall, investment bank Guggenheim initiated coverage of Tesla stock with a neutral rating and a $924 price target this morning. The analyst warned that it is "difficult to justify" an argument that the stock can rise much from current prices.  

Now what

So how bad is this news? Honestly, the recall sounds like a minor issue, covering a relative handful of cars, and Tesla has already agreed to tighten or replace any fasteners found to be loose. That should solve the problem in short order and at minimal cost.

Nor does the Guggenheim note seem a good reason for excessive alarm. On the one hand, yes, the analyst worries that Tesla may not go up a lot in the near term. On the other hand, Guggenheim's $924 price target is above the $912 share price that Tesla stock commands today. And in a note covered by, Guggenheim pointed out that both its near-term and intermediate-term earnings estimates for Tesla are actually "well above consensus" estimates at other banks.

In other words, whichever way the stock price goes, Guggenheim thinks Tesla is going to make a lot more money than a lot of people expect. That sounds like good news to me.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.