Tesla, more so than any car company, seems to be a weathervane when it comes to good news and bad news. In the last 24 hours, the company led by firebrand visionary Elon Musk has been dented by Consumer Reports and Bank of America.
But investors are undeterred by the bad news.
BofA auto analyst John Murphy, arguably one of the most influential analysts covering the industry, says he believes that Tesla’s acquisition of SolarCity will result in a loss of $2 in earnings per share this year, and that he sees shares falling 46.4 percent from Monday’s close. Ouch!
Meantime, Consumer Reports punished Tesla this week for its new cars, which lack automatic emergency braking (AEB), even though its older models do not lack for it. The influential consumer magazine said it lowered ratings for both the Tesla Model S and Model X because the latest versions of the vehicles still lack the AEB technology. The action came one week after Tesla was hit with a class action lawsuit claiming some of the safety features in its newest AutoPilot system were non-functional.
CR lowered the Model S’s ranking from 87 to 85, lowering its position from the top slot to third in its segment, behind the Lexus LS and BMW 7 Series. And the Model X also lost two points, driving its status with CR to nearly the bottom of its category.
Oddly, some of Tesla’s newest models lack safety features and other technology that is included in earlier vehicles. That’s because the company is shifting to a new AutoPilot system developed in-house, after parting ways with its previous technology partner, Mobileye. The new hardware was introduced last October, but the software has been dribbling out slowly, through over-the-air updates, as it is validated. Adaptive cruise control was added in January, for example, and AutoSteer was activated in February. Both have been enhanced to work at gradually higher speeds, currently 80 miles per hour. Tesla confirmed that it began rolling out automatic emergency braking (AEB) on Tuesday, the day before the Consumer Reports story came out. It should be available in all Tesla vehicles within a matter of weeks.

AEB enables a car to brake without the input of the driver’s right foot. Cameras, sensors and other tech aboard the vehicle senses when a vehicle is nearing a collision, and, when necessary, can react and act more quickly and decisively than the driver. It’s not standard on every car, but the industry is moving in that direction.
Meantime, BofA’s Murphy says Tesla’s stock will be nearly cut in half over the next 12 months because “positive earnings and cash flow [are] now even more elusive” in light of the Solar City drag.
“We believe the SolarCity acquisition introduces material risks to the longer-term viability of TSLA, while the recent capital raise only serves to further dilute potential shareholder value,” Murphy said in a note to investors. He has an “underperform” rating on the stock.
Murphy wrote that he sees Tesla shares falling to $165, a 46 percent drop from where the stock closed Monday at $308.03 a share.
Tesla is a favorite stock for the shorts and the incurably optimistic. And a day after Murphy’s note on the alternative transportation and energy company, investors stayed with Elon Musk– with only a 1.15% decline in share price. That’s faith.

Source: Forbes