Event: Electric car-maker, Tesla (TSLA) is seeing weakness today thanks to the company reducing its revenue forecast for the year. In a regulatory filing Tesla said that it would now generate $400 to $440 million for the full year. The prior estimate was for a revenue range of $560 to $600 million. The revised forecast came as a result of the company announcing that it would be selling additional shares to raise capital for general corporate purposes. Shares of Tesla fell by some 14% in pre-market trading, but have since recovered. In early regular trading the stock is down only 6%.
Analysis: The news from Tesla should not come as much of a surprise. The development of the electric car market is a work in progress. Earlier this month electric car part supplier, Polypore (PPO) reduced guidance. Tesla has a market cap north of $3 billion. Does it really matter if revenue this year is lower than the market expected. It may be a disappointment, but should not impact the long term value of the company. It should be noted that Tesla’s CEO expressed interest in buying $1 million worth of the new stock coming to market. That is a solid vote of confidence in the future of the company
Action: Use selling in the stock as an opportunity to buy shares of this long-term play.
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