Sorry to all the Elon fanboys out there, but Tesla can’t seem to catch a break these days. After rallying earlier this month, Tesla investors are punching air today as recent reports have surfaced that the EV company is being forced to recall 1.8 million cars because, wait for it, their hoods can pop open while driving. 

(Source: USA Today) 

Meaning yes, your shiny Model 3 could, in fact, decide to do an impression of a jack-in-the-box at 60 mph on the freeway (talk about turning heads…literally).  This recall impacts Model 3s, Model Ss, Model Xs, and Model Ys from model years 2021 to 2024. But what’s really weird is that this problem is particularly annoying in China, where it’s happening more often "for reasons unknown." 

(Source: ARS Technica) 

Tesla first got wind of this issue back in March, thanks to some unhappy campers in China (which is expected after getting a face full of metal). By April, they pinpointed the problem: a deformed hood latch switch. 

(Source: Reddit) 

After some engineering studies in Europe and North America, Tesla has finally decided to issue the massive recall. The bright side for Elon? No crashes or injuries have been reported (yet) and the fix is relatively easy with an over-the-air software update. Because, you know, in Tesla’s world, there’s no problem a little Wi-Fi can’t solve. 

(Source: New York Times) 

According to Tesla, the new software will warn drivers if their hood is open, giving them a heads-up before things get too Fast & Furious. 

However, with that said though, while Tesla’s hoods are busy trying to escape China’s surveillance state, this just adds another negative sentiment to Tesla and its stock. If you recall, during this hood issue, Tesla’s earnings report was busy disappointing investors as EPS came in at 52 cents, missing the expected 61 cents and down from 91 cents a year ago with sales just a hair above the anticipated $24.5 billion at $25.5 billion. But the real earnings burn was that the operating profit margin came in at 6.3% versus the expected 8%. Oof…

(Source: KSBW) 

This had Wells Fargo (who is ironically dealing with another business scandal, I might add) analyst, Colin Langan, calling the results “low quality,” pointing out that Tesla’s regulatory credit sales were higher than expected, hitting $890 million. Sure, it’s pure profit, but like mentioned in previous articles, investors want to see strong profits from actual car sales, not just government credits. 

(Source: Market Watch) 

Plus as if the recall and earnings weren’t enough to ruin Elon’s day, Tesla also got smacked with its fourth downgrade this week. Phillip Securities downgraded Tesla to a sell with a new price target of $135, down from $145. The analyst noted that Tesla’s margins are getting squeezed and European Union tariffs on China exports aren’t helping. 

(Source: IBD) 

During the earnings call, Musk didn’t do much to calm investors' nerves, talking up robotaxis and the Optimus robot—projects that are still quite aways from making an impact (if at all). But even with Elon trying to patch confidence, the universe apparently still hates Tesla this week as the stock is down -4.03% on the day (down -1.78% the past five days). 

So with all the recall talk, earning burns, and downgrades said - what’s the takeaway here? 

Well it’s no secret that Tesla’s stock had been riding high for the past three months, but reality seems to have caught up. Analysts are becoming more conservative on valuation (except for Morgan Stanley), and it’s clear that the hype train may be losing steam.

(Source: Giphy) 

As of right now, Elon seems to have more issues than a therapist's waiting room, and Tesla investors are right there with him.  With working towards fixing those hood latches, addressing margin concerns, navigating EU tariffs, and trying to figure out how to make money selling actual cars (crazy concept, I know), Elon has his work cut out for him. 

But, but, but even with that don’t sleep on Elon. He’s shown all of us that he can Johnny Football the market and make something out of nothing before, so hopefully he can magically turn around Tesla’s momentum sometime soon. 

(Source: Giphy) 

In the end, as we all await more cryptic tweets from Elon on Tesla’s future, keep an eye on the stock… or not. It’s up to you. But more importantly though, if you're driving a Tesla, maybe invest in a good helmet… you know, just in case. 

(Source: Pure Madness) 

Stocks.News holds positions in Tesla as mentioned in the article.