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One hot stock not participating in Friday's tech rally — Tesla

  • Shares of Tesla fell 1.6 percent on Friday after Evercore ISI downgraded the stock to in-line, citing production concerns.
  • Reports that the electric-car maker may be planning to cut its orders for Model 3 parts sent shares of Taiwanese auto parts maker Hota Industrial tumbling overnight.
  • Shares cracking? Tesla shares have been underperforming tech stocks and the broader market during the month of October.
Elon Musk
Brendan Smialowski | AFP | Getty Images
Elon Musk

While most technology shares jumped Friday on blowout earnings from the likes of Amazon and Alphabet, one key member of the hot-tech-stock crew is not participating: electric-car maker Tesla.

Shares of Tesla fell 1.6 percent on Friday after Evercore ISI, commenting on Tesla's persistent production problems, downgraded the stock to in-line from buy on Friday.

"Tesla is clearly running behind schedule with respect to the Model 3 ramp," wrote Evercore ISI analyst George Galliers. "Clearly third-quarter production was weaker than Tesla expected with 260 Model 3s produced vs. a targeted 'just over 1,500.' And, at this point, we have little insight into how production is running."

A report that the carmaker plans to cut its orders for Model 3 parts sent shares of Taiwanese auto parts maker Hota Industrial tumbling more than 7 percent overnight and also weighed on Tesla shares Friday. Tesla, Reuters said citing local media, appears to have told Hota Industrial that it would cut orders to 3,000 sets per week, down from prior estimates of 5,000.

Tesla did not immediately respond to CNBC's request for comment.

The stock is still up 50 percent for the year, though it is down 6 percent for October. Earlier this month, Tesla began firing hundreds of employees after it announced a recall of 11,000 Model X SUVs. The company continues to dismiss workers at its subsidiary SolarCity.

Tesla is trailing the broader market and technology shares this month with the S&P 500 up more than 2 percent in October. The Technology Select Sector SPDR ETF (XLK) is up more than 5 percent for the month.

Galliers' price target of $312 represents 4 percent downside from Thursday's close.

This isn't the first time analysts have voiced skepticism over Tesla's production problems. Goldman Sachs' David Tamberrino, also citing Model 3 production issues, reiterated his sell rating and predicted 40 percent share downside over the next year in a note earlier this month.

Jefferies analyst Philippe Houchois also joined the discussion on Friday, adding that while cash flow could surprise to the upside, he's still skeptical about near-term production potential.

"As important as numbers will be management's willingness to provide a credible path to Model 3 ramp-up," wrote Houchois on Friday, referring to the company's earnings report scheduled for Nov. 1. "Our Underperform rating reflects our doubts about the scalability of the business model to a level of margin that would support current valuation multiples."

CNBC's Gina Francolla contributed to this report.