There’s a well-known quote in the tech world: “You can recognize a pioneer by the arrows in his back.”
Yes, timing is critical. Just look at electric vehicles. Despite all the advertising, cool-looking models and offerings by some of the world’s biggest automakers, the EV market is not getting much traction. And this is dragging down the biggest-name pure-play EV maker, Tesla Motors (NASDAQ:TSLA).
Adam Jonas, an analyst with Morgan Stanley (NYSE:MS), cut his rating on Tesla stock from “overweight” to “underweight,” causing TSLA shares to dive almost 10% Thursday. He also brought down his price target from $70 to $44. His worry is that consumers are not ready for a major change in driving habits, spurring his pessimism for the entire EV market. In his note, Jonas also ratcheted down his forecast for the EV market penetration rate to 4.5% by 2025, not 8.6%.
This comes despite Jonas’ positivity toward Tesla’s progress on what could be a standout product — the Model S, a four-door, five-passenger sedan. The vehicle is based on cutting-edge technologies from engineers at Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL) and other hot companies. For example, the powertrain provides high performance with zero tailpipe emissions. The vehicle also will get 300 miles per charge and come equipped with a 17-inch touchscreen with in-car 3G connectivity.
But this whiz-bang technology might not be enough. Consider the travails of General Motors (NYSE:GM), which recently indicated that the Chevy Volt will not hit its 2011 goal of 10,000 unit sales (the latest count was 6,142). Japanese automaker Nissan (PINK:NSANY) also is experiencing sluggish sales with its all-electric Leaf.
Besides the inertia from consumers, the slowing global economy also is likely to be a headwind. This could be particularly tough for marketing the Model S, which is expected to retail at $49,900 (this includes a $7,500 federal tax credit).
It is extremely difficult to get a good forecast on the EV market. Perhaps the Model S will be a breakout hit after all. But for investors, Tesla presents a great deal of risk. As seen with yesterday’s move in TSLA stock, just a little bad news can have a big impact.
Tom Taulli runs the InvestorPlace blog “IPOPlaybook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.
