BUFFALO, N.Y. — Let’s start with the good news: Tesla stock flirted with an all-time high Tuesday and is up roughly 45 percent since the beginning of the year. Some market analyst believe its just a matter of time until the bubble pops, though.
“When I read the report, I was very concerned,” Assemblyman Mickey Kearns, D-Buffalo, said.
Bank of America lowered its price forecast for the company and questioned the electric car-makers “long-term viability.” In a note to investors, reported by CNBC, the investment firm predicted the value of shares would be cut in half over the next year.
“What it really comes down to is: product matters,” financial adviser Mike Lomas of The Financial Guys said. “Earnings matter. Companies need to make money long-term to be economically viable on the stock market.”
Lomas compares the Tesla situation to the so-called ‘dot-com bubble’ in the late nineties, when stock prices continued to rise based on speculation even though companies were not turning profits.
“All of a sudden in the late nineties, 2000-2001, investors said, ‘well wait a minute, XYZ.com might never make money.’ It did matter. Those stocks got hammered,” he said.
While the report lays out a number of concerns, it specifically blames the company’s merger with solar panel manufacturer SolarCity for introducing “material risks.”
“We were hoping with the acquisition by Tesla that that would enhance their product and unfortunately they’ve gone to market again and they’re asking for cash over and over again. They’re burning through cash pretty quickly,” Kearns said.
The company’s recently constructed solar panel factory, paid for and owned by New York State, is in the assemblyman’s Buffalo-area district.
“We’re hopeful it will benefit. It will pan out for the community and the state, however, reading that analysts report and reading the way they’re burning through cash, it is very concerning,” Kearns said.
Tesla, meanwhile, has maintained it’s on track to open the factory later this year.
“I’ve been saying for a long time: I would not be shocked at all if that’s a vacant warehouse in five years and we’re looking for somebody else to move in,” Lomas said.
Kearns said state officials should at the very least, be reaching out to Tesla to get more information about what’s been reported.