Reality Hits Tesla’s Stock Price As Goldman Sachs Says Its Priced Too High, Now What Matters Is The Basics: How Many Cars It Can Sell

[UPDATE Wednesday, 9:53 a.m. EDT] Tesla Motors Inc. (Nasdaq:TSLA) jumps over 5 percent to $115.11 in early trading as investors seek to profit off Tuesday's route that sent the price plummeting.

[UPDATE Wednesday, 9 a.m. EDT] Tesla Motors Inc. (Nasdaq:TSLA) opens trading Wednesday in New York at $109.05, up from $106.50 in pre-market.

[UPDATE Wednesday, 7:54 a.m. EDT] Tesla Motors Inc. (Nasdaq:TSLA) stock declined further in pre-market trading after shedding 1.19 percent to $107.75 overnight. With a little over an hour to go before opening bell in New York, the stock was down to $106.50. It has lost 20.1 percent since touching an all-time high of $133.26 on Monday.

[UPDATE Wednesday, 6:20 a.m. EDT] Tesla Motors Inc. (Nasdaq:TSLA) lost another 1.19 percent in after-hours trading to $107.75 as of early Wednesday morning. The company’s stock price has shed $25.51, or 19.1 percent, since Monday after Goldman Sachs said in a research note released Tuesday the stock price of the Palo Alto-based electric luxury sedan maker was overvalued.

Original story begins here:

Tesla Motors Inc. (Nasdaq:TSLA) stock is overheated, according to a Goldman Sachs analyst that said in the best case scenario the six-month price target for a share in the Palo Alto-based electric luxury sedan maker should be $113. On Monday it hit an all-time high of $133. Reacting to the comments, investors on Tuesday dumped shares, pushing the price down 14.3 percent to $109.10.

Goldman Sachs’ commentary reflects just how volatile Tesla’s stock has become as it has rocketed more than 275 percent in value from the start of the year. On Friday a share of Tesla became pricier than a share of Toyota Motor Corp. (NYSE:TM), the world's largest automaker by sales volume.

Goldman Sachs analyst Patrick Archambault is saying Tesla’s stock should be approaching $58 to $113 per share based on three different sedan sales volume scenarios: one high, one low, and one in between. Archambault’s most bearish scenario in his note has Tesla eventually selling 105,000 total units a year by 2018; his most bullish scenario is 250,000 units.

The company’s stock price has been on a tear since it reported its first-ever profit in the first quarter, jumping high from its low $40s in April, soaring on Tesla’s recent announcements to dramatically expand its proprietary supercharger network and to offer a rapid battery-swap system to address consumers’ electric-car range anxiety.

“This is more of a correction than anything else,” said Alec Gutierrez, senior market analyst for automotive valuation company Kelley Blue Book. “There might have been a little too much exuberance after they revealed the supercharger network and the battery swap, and especially after they announced beating Volt in the first quarter.”

Tesla’s Model S outsold both the Chevrolet Volt and the Nissan Leaf, two top selling electric models, in the first three months of the year with about 4,900 units.

Tesla fans are swooning at the recent developments, and even the skeptics of luxury electric cars are following Tesla closely to see whether their views are vindicated by Tesla’s failure or impugned by its success.

The movement of stock often reflects little more than gambling on emotions and hype, and hype is something Tesla Chairman and CEO Elon Musk, the South Africa-born founder of e-payment service Paypal and space transport company SpaceX, seems to be particularly good at creating -- most recently with his talk about unveiling open-source plans for a hypothetical 700 mph “Hyperloop” transport network between Los Angeles and San Francisco.

But the momentum for a company’s success isn’t its stock value. What really counts is how many Tesla sedans roll off the assembly line and into driveways and garages. Tesla says it expects to sell about 21,000 units this year, with sales expanding to Europe and Asia before 2014.

The company will issue its second-quarter earnings results after markets close on Aug. 7. Analysts polled by Thomson Reuters expect a 15 cent loss on earnings per share and $18 million in losses on $402 million in revenue. The company is currently expected by these analysts to report its second quarterly profit since it went public in July 2010 in the fourth quarter of 2013, after it eked into profitability in the first quarter thanks to selling its carbon credits.