Tesla Motors (NASDAQ:TSLA) had a rough start to the week as the stock closed down with a loss of $5.07 or 1.90% at $262.02 yesterday. You’ll be hard pressed to find a fundamental or technical reason why the shares of Tesla fell yesterday. The shares of Tesla made four new highs over the last two weeks. In fact, as last Thursday, analyst optimism in the stock was high with Doven of Jeffries raising his price target on the stock. Hence, the decline recorded in the stock yesterday is strange and unexpected.
Guilty By Association
The reason behind the decline recorded in the shares of Tesla yesterday can be traced to the bad news from Space X rocket launch on Sunday. Last Sunday, a Space Exploration Technology rocket on a re-supply mission exploded just two minutes after launch. News has it that a Space X Falcon 9 rocket on a resupply mission to the International Space Station exploded two and half minutes after it was launched from Cape Canaveral in Florida on Sunday.
The exploded rocket marks the third of Space X resupply mission effort to fail completely. This was also the seventh mission that Space X will undertake to the International Space Station. It is also the 20th rocket launch in the firm’s Falcon Program.
Investigations are still ongoing about the cause of the explosion. Elon Musk sent a tweet after the failed mission saying, “Falcon 9 experienced a problem shortly before first stage shutdown. Will provide more info as soon as we review the data“.
What’s a Blown Rocket got to Do With Tesla
PayPal, Tesla, Spaxe X, and SolarCity all have something in common, that common factor is almighty Elon Musk. Space X is Elon Musk’s private venture at space tourism with the ambitious plan to colonize Mars. The failed rocket launch is an embarrassment to Elon Musk and more so that the launch coincided with his 44th birthday.
Tesla investors are confident in the abilities of Elon Musk to lead the firm into profitability; otherwise, they won’t be pricing the stock at 73 times next year’s projected earnings. However, a failed rocket launch could as well be a failed Model X or failed Model 3. Hence, the ripple effect of the inability of Elon Musk to get a rocket into space suggests that Elon Musk is not infallible after all. Tesla investors should continue to expect that ripple effect inasmuch as Elon Musk in involved in other firms outside of Tesla.
Nonetheless, investor confidence will return to Tesla as quick as it escaped. The stock is already finding its way back to the bullish track this morning. Tesla was up 0.56% in pre-market trading to $263.48. Analysts are still positive about the prospects of Tesla and they expect it to touch $400 in the next one year. Dan Galves of Credit Suisse believes that Tesla will touch $400 in the next 12 months. James Albertine, an analyst at Nicholas Stifel now has a $400 price target in the stock.