Tesla stock extends rout, set to notch worst month ever

Tesla Inc. shares drew closer to their worst week and worst month, dogged by growing concern on Wall Street about the Silicon Valley car maker’s ability to meet its production goals for the Model 3 and by a string of bad news that included a downgrade for its debt.

Tesla TSLA, +1.54% stock was on pace for a pair of record lows on Thursday — its biggest weekly decline ever, down more than 15% on the abbreviated week, and its biggest monthly decline ever, down nearly 26% in March. Markets are closed on Friday in observance of Good Friday. The stock was the third worst performer on the Nasdaq.

The declines also demolished Tesla's long-held outperformance over the S&P 500 index SPX, +1.42% on a longer view. The shares are down 6% in the past 12 months, versus 12% gains for the benchmark and 17% gains for the Dow Jones Industrial Average. DJIA, +1.35%

The rout extended to Tesla’s debt, with the company’s 5.3% 2025 bonds trading around 88 cents on the dollar to yield 7.47%, according to trading platform MarketAxess.

Moody’s Investors Service late Tuesday downgraded their rating on Tesla’s debt on concerns about the Model 3 production and a “liquidity shortfall.” The bonds’ recent action suggest that the market is looking for “more downside,” IHS analysts said earlier this week.

“The whole world is watching Tesla,” analysts at Bernstein said in a recent note. The Model 3 was supposed to bring Tesla into the mainstream, and Tesla not only wanted to reinvent the car but also reinvent the production line with hyper-autonomation, the analysts said.

“We believe Tesla has been too ambitious with automation on the Model 3 line,” spending around two times what a traditional auto maker spends per unit on capacity, ordering “huge numbers” of robots and attempting to ignore auto-making history and automate final assembly.

“(Tesla) talks of two-level final lines with robots automating parts sequencing. This is where Tesla seems to be facing problems (as well as in welding & battery pack assembly),” the Bernstein analysts said.

Tesla stock also felt the pressure from news that Nvidia Corp. NVDA, +4.94% will temporarily suspend self-driving tests, following Uber Technologies Inc. fatal crash.

A slowdown in driverless-car testing and driverless-car development would affect Tesla as the multiples that the stock has traded “reflects future volume and market share assumptions predicated on a view that Tesla will be a leader in both electric vehicles and autonomous features,” analysts at Evercore ISI said in a note.

Earlier Thursday, analysts at Instinet lowered their price target on Tesla to $420, from $500, citing in part Model 3 production concerns.

Tesla is expected to report first-quarter deliveries and production numbers next week. Unlike other car makers, which report monthly sales and often break it down by region, Tesla reports quarterly deliveries, its proxy for sales, and production, breaking it down by model only.

All eyes are on the numbers for the Model 3 as production of the car, launched in July, has inched toward Tesla’s most modest and twice postponed predictions.

Several Wall Street analysts have cast doubts on Tesla’s ability to meet the latest goal: Being able to make 2,500 Model 3s a week by the end of the first quarter, with 5,000 a week by the end of second quarter.

Analysts polled by FactSet expect Model 3 deliveries around 12,300 for the January-to-March period; the expectations stood around 13,800 for the quarter last week. The same analysts forecast Tesla to deliver 13,100 Model S sedans and 11,500 Model X SUVs.

Staff writer Sunny Oh contributed to this report.

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