For a piece of junk, Tesla looks pretty good. The electric-car company earned a B- grade from Standard & Poor’s this week, which in Wall Street-speak is a “junk” rating that signals significant problems with a company’s books.
Analysts from the world’s biggest credit rater said Tesla’s future had “considerable uncertainty” and its business was “constrained by Tesla’s niche and independent market position,” according to Bloomberg . We’ve been critical of Tesla’s overhyped stock price—which hopped to $250 per share in late February after Morgan Stanley predicted Tesla would lead us to a “utopian society”—but the negative outlook of the company’s first-ever investment rating isn’t making much of a dent.
Stock prices have plateaued since Tesla announced a $50 million loss in the first quarter earlier this month, when its stock price dipped below $190. Tesla director Antonio Gracias unloaded 40,000 shares after that earning report, but the S&P rating so far hasn’t appeared to skew prices like Morgan Stanley analyst Adam Jonas’s gushing missives, which have supercharged Tesla’s stock at least three times since 2011. Other analysts downgraded Tesla stock last fall after several cars caught fire in accidents, with only minimal consequences for the automaker. Tesla stock is currently trading at around $210 per share—a roughly 40 percent year-to-date increase.
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None of these short-term opinions matter much until Tesla commits to its $4-billion Gigafactory, the ambitious battery plant that CEO Elon Musk is counting on to reduce production costs (which would help the company deliver its promised sub-$40,000 model) and increase profits. Maybe—and we’re guessing here—a series of consecutive quarterly profits would earn Tesla an A rating. Yet investors, who have made Tesla half as valuable as Ford and General Motors, don’t seem to care.
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