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Tesla Rebounds as Luxury Buyers Seen Looking Past Pump Prices
2014-12-10 11:06:36.92 GMT
By Keith Naughton
Dec. 10 (Bloomberg) -- Tesla Motors Inc. customers are rich
enough to buy luxury cars whatever the cost of a tank of
gasoline. So the oil rout may not hammer the stock for long.
The 13 percent decline in Tesla shares since the
Thanksgiving holiday in the U.S. 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 yesterday 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 seven-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 Dec. 8 in a note. It accelerated
following a disappointing estimate of Tesla’s November U.S.
sales Dec. 8 by the industry website InsideEVs.com.
Tesla rose 1.2 percent yesterday to close at $216.89 after
falling as low as $204.27. For the year, the shares have gained
44 percent.
Future Sales
Still, Kallo and InsideEVs.com suggested the recent market
reaction runs counter to Tesla’s future health. And sales of
hybrid and electric cars increased 1.6 percent in November from
October in the U.S. as gasoline prices were falling.
“We think the weakness provides a buying opportunity,”
Kallo said in the note. Tesla “will continue to see strong
demand which is largely driven by performance, quality, and
brand.”
The problem for Tesla could come much farther down the road
when Chief Executive Officer Elon Musk makes good on his promise
to build electric cars for the masses in a bid to change the
world like a 21st Century Henry Ford. The billionaire former CEO
of PayPal Inc. also is out to disrupt the utility industry and
space exploration with the battery gigafactory he’s building in
Nevada and his other companies, SolarCity Corp. and Space
Exploration Technologies Corp., known as SpaceX.
‘Sustainable Solution’
“The overarching purpose of Tesla Motors (and the reason I
am funding the company) is to help expedite the move from a
mine-and-burn hydrocarbon economy towards a solar electric
economy, which I believe to be the primary, but not exclusive,
sustainable solution,” Musk said in a 2006 blog post.
When Musk attempts to take on mass-market hybrids such as
the Toyota Prius, that’s where low fuel prices could become a
road block. Sales of Toyota Motor Corp.’s Prius fell 13 percent
last month and are down 12 percent this year as U.S. gasoline
prices have fallen to a 4.5-year low.
“The longer term threat is if cheap oil is permanent or
going to be here for a very long time,” Whiston said. “That
could create a problem for Tesla once it gets out of the vehicle
segments that cater to the very wealthy and get down to the
people who might normally buy a compact sedan like a Honda
Civic. Those are the people who care about the price of gas.”
Not Imminent
Such a threat isn’t imminent, nor is it assured, given the
volatility of oil prices over the years, Whiston said. That’s
why he has no plans to change his rating on Tesla of three stars
out of five.
“I think Tesla will be selling everything they can
produce, so I don’t think it’s time to cut solely on the oil
prices today,” Whiston said. “Selling on the fall of oil
prices isn’t necessarily the right thing to do.”
InsideEVs.com advised against putting too much emphasis on
Tesla’s sales in November before of the start of all-wheel-drive
deliveries this month.
“If there was ever a month to be ignored for Model S
sales, it would probably be November,” said InsideEVs.
Tesla fell for seven straight days, losing a total of 14
percent.
Falling fuel prices “has been an excuse to take profits in
the stock,” said Efraim Levy, auto analyst with S&P Capital IQ.
“When the average price of your car is $90,000, saving a few
bucks on a tank of gas is not the issue.”
While the carmaker said its will introduce a Model X sport-
utility vehicle in the third quarter of 2015, Volkswagen AG’s
Audi said it will roll out an electric-powered crossover in 2017
to challenge Tesla.
Kallo said buyers of electric vehicles are attracted by the
ability to ignore the ups and downs of gas prices.
“Although the recent decline in oil prices has caused
concern about EV demand, we believe EV purchasers are focused on
the long-term benefit of not being exposed to oil price
fluctuations,” he said. “We believe demand for TSLA’s vehicles
will remain strong.”
For Related News and Information:
Tesla income statement summary: TSLA US <Equity> CH2 Q <GO>
Global auto industry: NI AUT <GO>
Autos and U.S. economy: TNI AUT USECO <GO>
Top Transport Stories: TRNT<GO>
--With assistance from Alexandra Ho in Shanghai.
