A highly anticipated announcement from Tesla has turned into a headache for its stock, with shares falling 8 percent in Friday’s trading session.
In the announcement on Thursday, Tesla CEO Elon Musk said his company would lower the price of its Model 3, close most of its brick-and-mortar stores and would not turn a profit in the first quarter, leaving Wall Street largely unenthusiastic about the automaker’s near-term prospects.
Here’s what three experts, including CNBC’s Jim Cramer, thought of the moves:
- Cramer, host of “Mad Money,” was concerned about Tesla being able to maintain its margins but liked that the automaker moved purchasing online. Still, he said on “Squawk on the Street” that he’s “never seen a battleground like this in my lifetime. I mean, the stock, it’s either going to $0 or going to $1,000. And when you say it’s going to $1,000, people think you’re not rigorous, and when you say it’s going to $0, people think you’re un-American.”
- Former General Motors Vice Chairman Bob Lutz also raised concerns about Tesla’s profitability on “Squawk Box”: “I think they’re facing a great deal of difficulty, because it’s obvious that they had to cost-reduce the Model 3 in order to have some sort of margin on it at $35,000 apiece. And at $35,000, I doubt that there is much in the way of profitability in there, and if your costs are almost as high as your revenue, then it doesn’t really add to cash availability.”
- Oppenheimer analyst Colin Rusch, who covers Tesla, noted on “Squawk Box” that both the profitability warning and the $35,000 Model 3 announcement were expected on the Street: “I think there is a bit of ‘sell the news’ going on with the stock this morning. But, certainly, I think this is a very big milestone for the industry and for Tesla to reach a vehicle that’s hitting this price point. … Part of what’s happening here as they close stores is that they’re just maturing into what looks like the rest of the auto supply chain in terms of having more service centers and areas where folks can interact with the car, rather than having these stores that really are more of a branding and marketing exercise.”
