At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Today, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.
Ruh-roh, Shaggy!
Things are not looking good for the electric car industry, as confirmed by not one but two separate articles in The Wall Street Journal this morning. According to the Journal, sales of General Motors' (NYSE: GM) vaunted Volt electric car are lagging badly, with just 603 units sold in the month of January. For a company that's invested "billions" in the Volt's development, that's bad news for GM.
But it could be worse news for electric car-battery maker A123 Systems (Nasdaq: AONE).
As you may recall, last year A123 was all the rage among green energy enthusiasts, in part because it had just landed a contract with GM to supply batteries for a new electric vehicle. If Volt doesn't turn around soon, though, a Fool has to wonder if that second project will even get built. Meanwhile, one contract A123 is already hard at work on is starting to look iffy. As the Journal revealed this morning, A123 customer Fisker Automotive has just had its $529 million line of credit from the federal government frozen for failure to "meet certain deadlines for developing the car." Fisker's scrambling to find new sources of funding but has already begun laying off workers in case that doesn't work out.
One banker who's not waiting around for the other shoe to drop is ace analyst Wunderlich, which this morning issued a sell rating on A123 and slashed its price target on the stock from $3 to $0.50. And I can't say I blame them.
Let's go to the tape
Automotive investors are by now well aware of the dire straits the electric car industry is in. On one hand, demand for a product that costs as much as $40,000 for a plain-vanilla vehicle like the Volt (and can run to $100,000 and beyond for more cutting-edge products such as Tesla's (Nasdaq: TSLA) Roadster) has been anemic. General Electric (NYSE: GE), which in 2010 boldly promised to go into a market where no corporate titan has gone before, seems to have had second thoughts. If it's buying electric cars at all, it's in no great hurry about it.
On the other hand, just as we're seeing demand for the Volt evaporate, Tesla itself is getting ready to begin shipments on its wildly popular (judging from the pre-orders) Model S sedan -- and today promises to unveil its third electric car offering, the Model X SUV.
Sadly, even if Tesla's electro-buggies turn out to be more popular than GM's Volt, they'll do absolutely nothing for A123 -- because Tesla doesn't use A123's tech at all. Instead, it buys batteries from competitor Panasonic (NYSE: PC).
"A123"? More like $3, $2, $1, ($0.50), $0
I have to say, none of this bodes particularly well for A123. Plagued by similar problems, rival battery maker Ener1 has already gone belly up. With barely $22 million left in its bank account, and burning cash at the rate of more than $420 million per year, I fear A123's days may be numbered as well.
What's more, I'm going to put my reputation where my mouth is on this one. I'm so convinced this stock is a dog that I'm going to head right over to Motley Fool CAPS right now, and publicly predict it will lose to the market. Think I'm wrong? Follow along and find out.
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