There’s no denying that Tesla Inc. (TSLA) shares have been on a tear over the past year, especially in comparison to other automakers. In fact, while TSLA has surged 44%, General Motors (GM) has increased 22%, Toyota Motors (TM) has risen just 8% and Ford Motor Company (F) has actually fallen 11%.
Back in April, Tesla made headlines when it surpassed Ford to be the largest publicly-traded automaker in terms of market cap. That news was shocking. Consider this: Tesla is expected to bring in just over $11.4 billion in revenue this year. Ford’s sales are expected to top $142 billion.
While Tesla has been a "hot stock" for some time, it’s looking like its fortunes may be changing…and not for the better. In the past week alone, TSLA shares have plunged nearly 20%. Tesla sparked the selloff when it announced that sales of its electric sedans and SUVs were weaker than expected for the first half of 2017. According to management, Tesla was slowed down by a severe shortfall of new battery packs.
Investors reacted poorly to the news, which wasn’t surprising. After all, Tesla shares have been trading above analysts’ median price targets for the past few months. So there are concerns brewing that TSLA may be a bubble stock.
Considering this recent setback, and given the fact that I’m a numbers guy and require impressive earnings and sales results from my stocks each quarter, I’m not jumping on the Tesla bandwagon. The fact is that TSLA is expected to post negative earnings for its second-quarter report in early August. The consensus estimate calls for a loss of $1.62 per share, which is worse than the $1.61 loss posted a year ago.
For now, I recommend avoiding TSLA, as well as the big three automakers.: F, GM and TM. To stay on top of my latest stock ratings for these four companies, plug their symbols into Portfolio Grader, my proprietary stock screening tool. You may get started here.