On September 21st, TSLA traded at $270+ per share early in the day.  Yesterday it closed at $215    …and is sliding again in pre-market trading as I’m writing this post.  That’s a loss of almost 20% during a period when the S&P is up about 2%.  What’s going on?

TSLA is an early-stage car company that is still spending money faster than sales revenue is coming in.  That’s why it is forced periodically to raise new capital on Wall Street.  Officially, TSLA is still projecting that it will sell 50,00 cars this year, a figure that would bring it to breakeven on a cash flow basis–meaning sales revenue would be sufficient to cover all its spending.  Recently, however, the company has been making noises that it will fall short of that figure, mostly because it’s having more trouble than it thought with reprogramming its machine tools to handle producing two models on the same assembly lines.

Let’s say TSLA falls 5,000 cars short of its 50,000 goal.  At first blush, this doesn’t sound too bad. But figure that each car would retail for, say, $120,000.  If so, a shortfall of 500 means $60 million less in the bank than anticipated.  It also means that TSLA won’t reach cash flow breakeven until sometime in 2016.

Something similar happened to TSLA this time last year, when bad weather and sales weakness in China made 4Q14 look ugly, however. TSLA has also been hinting for months that the 50,000 goal may be out of reach, even though “officially” it has not changed its production figure.  So this isn’t exactly new news.

I think two other factors are behind TSLA’s weakness.

–Up until about a month ago, Wall Street brokerage house analysts have been writing super-bullish reports on TSLA.  This amped-up enthusiasm is always what happens in advance of a capital raising (in August, TSLA issued about three-quarters of a billion dollars in new shares).  Now, analysts are, as usual, toning down the rhetoric, and conceding that TSLA might indeed be still cash flow negative at yearend.  Par for the course.  Yet this new analyst narrative is causing the stock to fall, in my view.  This suggests research reports are being processed in larger than normal measure by robots who believe everything they read.

–Investors may also be becoming more cautious about speculative stocks like TSLA because they are finally convinced that the interest rate cycle has turned and that rates are on the cusp of a multi-year upward course.  One enduring market metaphor for stocks is that they are a funny kind of bond.  That is, that they can be evaluated by calculating the present value of future cash flows (this is much, much easier said than done).  A speculative stock is somewhat like a zero-coupon bond, with all the value far in the future.  As discount rates rise, the present value of securities like these erodes the fastest.

This is by no means a fatal flaw in the TSLA story, in my view.  It just suggests to me that trading may mimic the pattern of a year ago for a while.  What’s more interesting is the possibility that the stock market is finally beginning to factor into prices the idea of higher interest rates.