Tesla has been enjoying record-surges in stock but it appears the momentum will be placed on pause for now. With the coronavirus outbreak plaguing China, business operations have been disrupted. With death tolls rising, locals have been prevented to report for work and such has created delays in deliveries.
According to Reuters, Tesla stocks have tumbled 17-percent as a result of the coronavirus issue. A big reason for this is that deliveries, particularly for the Tesla Model 3, will now be delayed. It was Tesla vice president Tao Lin who mentioned on social media that car deliveries from its new Shanghai plant would be temporarily delayed. A target date to restart production is on Feb. 10.
There is no telling if the surge of Tesla stocks will rebound once operations are back to normal. Regardless, some analysts remain skeptical on the extreme price-to-earnings multiple phenomena. Some remain befuddled by it compared to leading technology companies. Some question the ability of Tesla to consistently deliver profit, cash flow and growth compared to established rivals like BMW and Volkswagen.
Before drops, Tesla is still trading about 55 times expected from its 2021 net income. The stock was at 17-percent at about $738 on Wednesday. But a sudden selloff in the final minutes of a rally kept it at 14-percent.
“We continue to believe TSLA is fundamentally overvalued – but nevertheless concede that the recent price action opens up the possibility of raising capital cheaply, and hence reduces that chance of a stalled business,” Barclays analyst Brian Johnson said.
The resumption of operations in China is expected to be crucial for Tesla. The factory is expected to make more than 500,000 cars this year and delays could alter those numbers.
BBC reports that Tesla is not the only one that needs to adjust to the coronavirus outbreak. There are other companies in Asia filling that pinch. One includes Hyundai after South Korea shut down all of its factories because majority of their components coming from China had run out. They are planning to re-open early next week. Hyundai is the fifth largest car maker in the world.
The same case holds true for other popular car makers holed up in China. Toyota, Nissan, Honda and Ford were forced to stop operations for now due to the coronavirus outbreak. Aviation-related companies were also forced to close down temporarily. As of this writing, the reported death toll over in China due to the coronavirus has risen to 563, Al Jazeera reported.