Tesla stock drops with oil prices, but will it bounce back?
The 14 percent decline in Tesla shares since the Thanksgiving holiday through Monday was driven by concerns that falling oil prices will dry up demand for the company's cars, analysts said.
That speculation is overblown, said David Whiston, an auto analyst with Morningstar Inc. in Chicago. Since Tesla is selling cars that can top $100,000 to very wealthy people, the price at the pump is not a prime motivator in that consumer's purchase decision, he said.
"A lot of investors think cheap oil is bad news for Tesla, but it's not that simple," Whiston said today in a telephone interview. "People who are buying Tesla today don't really care if gas is cheap or expensive. They want it because it's a status symbol or for the performance or they are very eco-conscious and just don't want to consume fossil fuels, regardless of what they pay for the fossil fuels."
The eight-day selloff should be seen as an opportunity to buy the stock at a discount, said Ben Kallo, an analyst with Robert W. Baird & Co., said Monday in a note. It accelerated Monday following a disappointing estimate of Tesla's November U.S. sales by the industry website InsideEVs.com.
Today, Tesla rose 1.2 percent to close at $216.89 after falling as low as $204.27.
'Less incentive'
Consumers paying less at the pump may diminish the need for vehicles that run on an electric charge and can cost as much as $100,000. Gasoline prices in the U.S. as of Monday had fallen for 69 days to an average of $2.66 per gallon, according to the motoring club AAA.
"With the low oil prices, people will think ‘I can buy a normal car, it's more beneficial that way,'" Ole Hui, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., said by phone. "There's less incentive to go to electric vehicles."
InsideEVs.com estimated Tesla's U.S. sales in November at 1,200 Model S cars, which would be the lowest in three months and unchanged from a year earlier. Tesla's U.S. sales have fallen this year as the Palo Alto, California-based company began exporting its Model S luxury sedan to foreign markets. The company said it expects next year to sell 50,000 of the Model S, named last week as top luxury car in satisfaction in the Consumer Reports annual buyers survey.
"We believe the recent decline in TSLA shares is largely driven by the concern low gasoline prices could impact demand if sustained for the long term," Kallo said Monday in a note. More at Autonews/Bloomberg