Moody's Lowers Tesla Inc (TSLA) Credit Rating

For the most part, Wall Street seems to have shrugged off production issues that may come up along the way for Tesla Inc (NASDAQ:TSLA). However, those issues may finally be catching up with Tesla, especially when combined with concerns over the company’s cash burn rate.

As Bloomberg explains, Moody’s Investors Service has reacted to the concerns surrounding Tesla.

Tesla Inc.’s credit rating was downgraded by Moody’s Investors Service on Tuesday as the electric car company burns through cash, fails to meet production expectations and may soon have to raise more than $2 billion.
Moody’s cut Tesla’s overall rating to B3, or six levels below investment grade, from B2 and said its outlook on the company is negative. Tesla’s $1.8 billion of senior unsecured notes, issued in August, were downgraded to Caa1, seven steps into junk, from B3.

No comment has been forthcoming from Tesla on Moody’s concerns and downgrade. In his report, Moody’s analyst Bruce Clark called specific attention to the problems that have led to Tesla’s rating being dropped.

“Tesla’s ratings reflect the significant shortfall in the production rate of the company’s Model 3 electric vehicle,” Clark wrote. “The company also faces liquidity pressures due to its large negative free cash flow and the pending maturities.”

Tesla Inc shares fell $4.68 (-1.68%) in premarket trading Wednesday. Year-to-date, TSLA has declined -10.33%, versus a -1.95% rise in the benchmark S&P 500 index during the same period.

TSLA currently has a StockNews.com POWR Rating of D (Sell), and is ranked #16 of 24 stocks in the Auto & Vehicle Manufacturers category.