Investors and analysts, apparently, considered it more of a “no-brains” move and promptly drove Tesla shares down $22.95 or almost 10.5% Wednesday.
The Subsidy Problem
One big issue is the fact Tesla is taxpayer-subsidized and so is SolarCity. Given the state of politics in America today, it’s not difficult to see why a business plan that depends on Congress could be considered a bad idea.
Not only that, but Tesla and SolarCity both lose money. Investors and analysts understandably would want to know how putting two losers together could somehow magically create a winner.
The Trillion Dollar Idea
The plan to set up a business in which people could buy electric cars and solar panels without leaving the store was, Musk predicted, a way for Tesla to become the first company ever to reach $1 trillion in market cap.
Rather than exercising marketing brilliance, many believe Musk is simply trying to find a way to bail out SolarCity using Tesla. The problem is that Tesla has a high debt-to-equity ratio and isn’t exactly a cash cow. Shareholders seem to agree.
Buy The Car Not The Stock
TheStreet’s Jim Cramer put it succinctly. “If you like Tesla,” he says, buy the car, not the stock.” To be fair, Cramer said that long before Musk’s recent scheme. And to Cramer, it is all part of a scheme – and a vision – not necessarily a bad thing – just a bad idea.
Musk, Cramer says, wants to reinvent the electric grid. To that end, by Cramer’s estimation, Musk is conflicted and his move is actually hurting owners of Tesla shares.
The Real Master Plan
Cramer’s take on what he says is Musk’s ultimate goal is insightful – if a bit scary. Musk wants people to buy his car, solar panels and batteries, store electricity therein and us the juice to power the car.
Unfortunately, there’s an intermediate step by which Tesla stock gets hammered, as it did Wednesday. At that point analysts shake their heads while shareholders shake their wallets.
What To Do
With the potential offer by Tesla to buy SolarCity at a 21% to 30% premium over Tuesday’s closing price of $21.19, Zacks sees an opportunity for investors with 3 solar stocks, especially given the favorable climate as oil prices improve.
Hanwha Q CELLS Co., Ltd. based in South Korea, produces PV cells, PV modules, silicon ingots, and silicon wafers in the U.S., Europe, South Korea, Japan, the People’s Republic of China, India, Turkey and elsewhere.
Finally, Chinese solar manufacturer Yingli Green Energy Holding Co. Stock not found YGE, which grew about 19% over the past month, registered a profit in its recently release Q1 earnings report.