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This is a 'critical time’ for Tesla, says Moody's analyst who downgraded its credit rating

  • Anxiety is rising as Tesla gets closer to announcing its latest Model 3 production numbers, Moody's analyst Bruce Clark says.
  • Moody's downgraded Tesla's credit ratings late Tuesday and changed its outlook to negative from stable.
  • It cited "significant shortfall" in the Model 3 production rate and a tight financial situation.

Anxiety is rising as Tesla gets closer to announcing its latest Model 3 production numbers, Moody's analyst Bruce Clark told CNBC on Wednesday.

"This is clearly a very critical time and we're getting close to that point where they're going to have to make this announcement. As you get closer to these inflection points, the volatility, the anxiety obviously could go up," he said in an interview with "Power Lunch."

Moody's downgraded Tesla's credit ratings late Tuesday and changed its outlook to negative from stable, citing "significant shortfall" in the Model 3 production rate and a tight financial situation.

The credit ratings agency also said the electric-car maker will likely need to raise more money in the near future to meet its cash needs and maintain its expected pace of expansion.

A rear view of Tesla's new Model 3 car on display on Friday, January 26, 2018, at the Tesla store in Washington, D.C.
Salwan Georges | The Washington Post | Getty Images
A rear view of Tesla's new Model 3 car on display on Friday, January 26, 2018, at the Tesla store in Washington, D.C.

Tesla is currently targeting a weekly production rate of 2,500 by the end of March.

If it slightly exceeds that number, there still won't be much upside, said Clark, because it has a large cash burn right now.

However, if it significantly misses its target, that's a negative sign.

"They're going to have to go back to the capital markets, raise a pretty significant amount of debt to help cover that burn and also to prepare themselves for about $1.2 billion in maturities of convertible bonds," said Clark.

On Wednesday, Tesla shares tumbled for a second day in a row, hitting a new 52-week low. The stock was down more than 8 percent in afternoon trading. The Moody's report also sent the company's bond price plunging Wednesday.

However, the Moody's downgrade wasn't the only thing pressuring Tesla's stock.

On Wednesday, Morgan Stanley weighed in, saying the company must quickly improve its Model 3 production rate if it wants to raise critically needed funds from investors at a decent price.

And on Tuesday, the National Transportation Safety Board said it sent investigators to look into a fatal crash involving a Model X SUV last week in California. Citigroup also said Tuesday that its analysis of the Model 3 competition points to near-term risk for the stock.

Tesla declined to comment on the Moody's downgrade. However, the company did defend its Autopilot driver-assist technology in wake of the California crash.

— CNBC's Evelyn Cheng and Tae Kim contributed to this report.