Fuelled by a rash of bad press, shares in the high-performance electric automaker are down 35% since their record close in September. In the past week, the company has had three employees injured in an accident at its Fremont, Calif.-based factory and a probe was opened by the U.S. National Highway Traffic Administration (NHTA) to look into potential fire risks posed by Tesla’s batteries.
The bad news has cooled a stock that has been on fire this year. Despite the recent setbacks, Tesla’s stock is still up more than 267% year to date and the shares are valued at a whopping 235 times 2013 forward earnings, which should concern investors more than a few battery fires. By comparison, General Motors Co.’s forward P/E is 11.2x and Ford Motor Co.’s is 10x.
But valuations seem to be an afterthought for many Tesla investors. Fears about the company’s batteries have driven the stock down, but most analysts agree Tesla is likely to come out of the NHTA probe victorious.
Stifel Nicolaus analyst James Albertin told Reuters Tuesday that price volatility surrounding the probe “amounts to nothing more than noise.” S&P Capital IQ analyst Efraim Levy, meanwhile, believes the probe is a big opportunity for Tesla to solidify its reputation for safety.
Investors seem to feel the same way. The stock tumbled 10.2% on Monday following the announcement of the probe, but it has since bounced back by more than 3%.
