Tesla Motors Inc (TSLA): Why The Stock Keeps Falling

tesla motorsTesla Motors Inc (NASDAQ:TSLA) kept on falling this week. It was a rough week for the market as a whole, but TSLA dropped even more, falling 4.81 percent for the five trading days from Tuesday, Dec. 9, through Monday, Dec. 15, while the Dow dropped 3.75 percent and NASDAQ dropped 2.85 percent during that time. As of mid-day Tuesday, Dec. 16, TSLA continued to fall. At times the price dipped below the $200 mark, which hasn’t happened since June.

Up More than 33 Percent Year-to-Date

While TSLA has dropped steeply in the last three months from its all-time high of $291.42, it is still up more than 33 percent for the year-to-date, which is much better than the market as a whole. NASDAQ gained 10.16 percent year-to-date, and the Dow gained only 4.04 percent.

Reasons for the Drop

At least some of the recent TSLA drop can be attributed to profit taking. The falling price of oil (down more than 40 percent since Spring) has also played an important part. When gasoline prices fall, and it becomes cheaper to operate conventional gasoline-powered vehicles, all-electric vehicles become less attractive. Even if this may not be as big a concern for Tesla’s high-end customers as it would be for more budget-minded consumers, it still appears to play a significant role in investor sentiment.

Other possible reasons for TSLA’s fall include a delay in the planned release of the new SUV and the company’s potential problems in meeting its 2014 targets.

What About the Long Term?

While TSLA is under short-term pressure, the situation could change at any time. Tesla still produces a car that has a fanatical fan base, its upcoming SUV and mass-market car will enlarge its market, it is expanding its charging network all around the world, and the gigafactory could be a game changer. Most of all, TSLA loyalists see Tesla’s CEO Elon Musk as a visionary who will overcome obstacles and change the way that the world drives.

Head of Tesla in China Resigns

On Friday, the head of Tesla’s operation in China resigned without publicly giving a reason. She had been on the job for less than nine months. China is a crucial market for the company.

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