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ASX lithium shares have certainly gotten their fair share of attention over the past year.

And for good reason.

Lithium prices have been soaring amid rapid growth in electric vehicles. Lithium is a core ingredient in the batteries that get them from A to B. And with current supplies struggling to keep up with demand, the price of the lightweight, conductive metal has soared some 500% over the past 12 months.

And that’s seen the prices of both established ASX lithium shares as well as junior lithium explorers skyrocket.

ASX lithium shares booming

Here’s what we mean.

Below are the share price gains for a range of ASX lithium shares over the past 12 months:

• Core Lithium Ltd (ASX: CXO) up 344%
• Pilbara Minerals Ltd (ASX: PLS) up 123%
• Mineral Resources Limited (ASX: MIN) up 12%
• Allkem Ltd (ASX: AKE) up 70%
• Liontown Resources Limited (ASX: LTR) up 232%

For some context, the All Ordinaries Index (ASX: XAO) is up 4% over the same period.

But with many investors now looking to get in on this outperformance, we look at why these brokers warn that not all ASX lithium shares are created equal.

Explorers could face big pullbacks

Ben Cleary is the CEO of the Tribeca Global Natural Resources Fund.

According to Cleary (quoted by the Australian Financial Review):

The surge in prices has lifted all boats in the lithium sector, and in terms of exploration assets, you’ve only got to say that you think there’s lithium and you’re getting material re-rates. So of course, when lithium prices do eventually pull back, there are going to be some fairly big pullbacks in some of these exploration assets.

The incumbents are generating a lot of cash flow for retail investors, so you’d expect to see pretty significant shareholder returns, and dividends and buybacks, which you’re not going to get with exploration companies.

The existing producers still look pretty cheap on current spot prices, but the key question is where do long-term prices land?

Cleary favours the established ASX lithium shares already producing product. Mineral Resources and Allkem are the biggest lithium stock holdings in the Tribeca Global Natural Resources Fund.

What prices are they really receiving?

Another issue to consider when running your slide rule over ASX lithium shares is the prices they’re actually receiving for their product.

Often producers may be selling at prices determined in prior months, rather than the soaring spot price.

“We think the ability of a producer to realise prices closer to a rising spot is a key factor in picking relative outperformance in the sector,” UBS analyst Lachlan Shaw said (quoted by the AFR). “This means realised prices lag spot pricing when spot is rising, with the difference accentuated when the spot market is moving quickly.”

David Franklyn, portfolio manager of Argonaut’s Natural Resources Fund added, “The raw material suppliers are in a very strong position to negotiate, particularly if they can grow production over time because the people they have offtake agreements with are scrambling for resources and are more likely to deal.”

What to look for in ASX lithium shares

According to Franklyn (from the AFR):

We look out for large companies that are in tier-one locations, have a large resource base, are in production and also have the ability to further grow production. The guys who maximise the benefit of those higher prices are the ones that are in production today and don’t have everything locked away in long-term contracts because you need to be able to sell near spot.

In the medium term, there will have to be a point when supply will catch up to demand and prices will clearly soften. The question is when that happens because there are many moving parts, but the way to try and mitigate risk is to go with the bigger, more established producers.

The Argonaut Natural Resources Fund’s biggest ASX lithium share holdings include Pilbara Minerals, Mineral Resources and Liontown Resources.

The post Top brokers explain why not all ASX lithium shares are created equal appeared first on The Motley Fool Australia.

More reading

• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Brokers name 3 ASX lithium stocks to buy now
• Core Lithium share price gives up early gains to close 5% lower
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• What’s dragging the Mineral Resources share price lower on Tuesday?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The National Australia Bank Ltd (ASX: NAB) share price has started the day in the red.

The banking giant’s shares were down as much as 3.5% to $31.24 in early trade.

The NAB share price has since recovered a touch but remains down 1.5% to $31.98 at the time of writing.

Why is the NAB share price falling?

Investors have been selling down the NAB share price today after the banking giant’s half-year results disappointed the market.

For the six months ended 31 March, NAB reported a 4.6% increase in revenue to $9,071 million and a 4.1% lift in cash earnings to $3,480 million.

A note out of Goldman Sachs highlights that this was short of expectations. The broker said:

“NAB reported 1H22 cash earnings (company basis) from continued operations of A$3,480 mn, which was up 4% on pcp and 2% below GSe, driven by lower-than-expected Trading non-interest income and higher operating expenses. As such, 2H21 PPOP missed GSe by -3%. However, on an ex-Trading income basis, PPOP was 3% better than GSe.”

Costs outlook disappoints

While the earnings miss was disappointing, the main weakness in the NAB share price may have been driven by its costs outlook.

NAB has followed the lead of Australia and New Zealand Banking Group Ltd (ASX: ANZ) by abandoning its cost base targets. Goldman highlights:

“Looking forward, NAB highlighted: i) No longer targeting cost ambition of $7.7bn by FY23-25, ii) Investment spend expected to be c.$1.4bn p.a. from FY22 (previously broadly flat on FY21 A$1,259mn), and iii) FY22 opex expected to increase by c.2-3% reflecting a) Growth opportunities, and b) Cost headwinds including inflation and costs to deliver activities required under AUSTRAC’s Enforceable Undertaking (EU) – Estimated costs of A$80-120 mn p.a. in FY22, FY23 and FY24 to deliver the EU (here) requirements.”

Are NAB’s shares in the buy zone?

As things stand, Goldman Sachs has a conviction buy rating and $34.03 price target on NAB’s shares.

However, this recommendation could change once the broker has updated its financial model. Which is exactly what happened with Goldman’s rating on ANZ’s shares this morning, as you can read here.

The post NAB share price tumbles on earnings miss and costs outlook appeared first on The Motley Fool Australia.

More reading

• NAB share price on watch amid $3,480 million half-year cash profit
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• Why ASX 200 bank shares are in the spotlight
• Here’s how some of the biggest ASX 200 shares are responding to the RBA’s rate rise
• Own NAB shares? Here’s what to expect with the bank’s half-year result

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The South32 Ltd (ASX: S32) share price performance will give investors reason to smile. But the miner’s latest coal expansion plans have drawn sharp criticism from environmentalists who warn it could threaten Sydney’s drinking water.

Shares in the diversified miner have jumped 16% since the start of the year — including a 2.26% gain this morning to $4.745 — while the S&P/ASX 200 Index (ASX: XJO) has lost more than 3%.

The South32 share price is even beating its bigger peers this year. The BHP Group Ltd (ASX: BHP) share price and Rio Tinto Limited (ASX: RIO) share price have added around 12% each over the period.

Coal cloud hangs over South32 shares

But not everyone is happy with South32. Its new plans to extend the life of its Illawarra coal mine have been called “highly disturbing” by the New South Wales Lock the Gate spokesperson, reported the Australian Broadcasting Corporation.

The miner wants to dig out an extra 5.2 million tonnes of coal a year from the Dendrobium colliery until 2035. It is also aiming to upgrade and extend the existing mine infrastructure so it can keep using it until 2041.

Given where coal prices are, that should be good news for shareholders. But environmentalists are alarmed because the mine is under Sydney’s water catchment.

What’s more, South32 is proposing using the more damaging longwall method to extend the life of the mine. The board and pillar technique is seen to be less damaging.

“This is a highly disturbing situation in NSW — it’s unprecedented and the risks are very great to the Sydney and Illawarra drinking water catchment,” the ABC quoted New South Wales Lock the Gate coordinator Nic Clyde as saying.

South32 shares caught between politics and science

South32’s coal expansion proposal had already been granted State Significant Infrastructure (SSI) status when it submitted a more aggressive original plan. The original proposal, which was to extract 78 million tonnes of coal by 2048, was rejected by the Independent Planning Commission last year, reported the ABC.

Clyde also believes the state government approval process for the expansion is political and not evidence-based.

But South32 is trying to allay concerns about the environmental impact of the mine expansion. It said its revised plan reduces surface water losses by 78% and will offset the water losses.

South32’s improved expansion proposal

It is estimated that the water loss will be less than 1% of the Avon and Cordeaux catchment yields.

The mine’s footprint will also be 60% smaller under the new plan compared to the original proposal.

But this is unlikely to appease environmentalists. While Clyde welcomes the move to limit the impact of water losses, he is unconvinced the mine won’t threaten Sydney’s drinking water supply.

“The simple fact is South32 want to continue longwall mining that will further damage a special area of the water catchment and will still result in significant water loss,” he said.

“It just doesn’t make sense to risk these areas and our fresh water supply in perpetuity.”

The post Own South32 shares? Here’s why the miner’s latest coal plans have been called ‘highly disturbing’ appeared first on The Motley Fool Australia.

More reading

• Broker names the best ASX shares to buy right now
• The ASX 200 shares that fund managers are buying and dumping
• Broker says the South32 share price is cheap at current levels
• Why City Chic, Coronado, South32, and Syrah shares are charging higher
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor Brendon Lau has positions in BHP Billiton Limited, Rio Tinto Ltd., and South32 Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Magellan Financial Group Ltd (ASX: MFG) share price is heading north today following the company’s funds under management (FUM) update.

At the time of writing, the fund manager’s shares are swapping hands for $17.27, up 3.29%.

For context, the S&P/ASX 200 Index (ASX: XJO) is also in the green, trading at 7,343.4, up 0.53%.

FUM outflows continue for Magellan

Investors are digesting the latest FUM report, sending the Magellan share price to a two-month high.

In its release, Magellan reported that total FUM have fallen by $1.4 billion in net outflows between 31 March to 29 April. This comprises a drop of $900 million from retail investors as well as $500 million from institutional clients.

Across the board, total FUM stood at $68.6 billion at the end of April.

Global equities made up more than half of the FUM, with a decrease of $1.6 billion to $38 billion recorded. However, infrastructure equities registered a slight increase to $20.7 billion, and Australian equities remained at $9.9 billion.

The exchange rate fared in favour of the United Stated dollar with the conversion at 0.71065 USD. This compares to the 0.75095 USD rate at the end of March.

Magellan share price snapshot

Since the beginning of July 2021, the Magellan share price has continued to tread downwards despite today’s gains.

Reaching a 52-week high of $56.18 on 2 July 2021, this means the company’s shares are down by roughly 70%.

Year to date has also fared no better, with losses of around 18% so far in the past five months.

Magellan has a price-to-earnings (P/E) ratio of 10.12 and commands a market capitalisation of around $3.19 billion.

The post Magellan share price lifts as FUM tumbles again appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX shares today
• Why is the Magellan share price soaring 7% today?
• ASX 200 midday update: Woolworths’ Q3 update, AGL falls on Cannon-Brookes raid
• Dividend beasts: 5 ASX 200 shares with the highest dividend yield right now
• Magellan share price lifts as company tells investors, ‘We need your help!’

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Motley Fool Australia Chief Investment Officer Scott Phillips joined Nine’s Late News on Wednesday night to discuss the implications of higher interest rates, what we can expect next, and what he’s watching as the US Fed makes its rates call overnight.

The post The implications of higher rates, and what’s coming next? Scott Phillips on Nine’s Late News appeared first on The Motley Fool Australia.

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• Flight Centre share price higher amid premium and business travel joint venture news
• Qantas share price stalls amid Alliance Aviation acquisition
• Here’s why the BWX share price is crashing 22% to a multi-year low today
• What’s the outlook for the BHP share price in May?
• Why Tesla stock dropped this morning

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Flight Centre Travel Group Ltd (ASX: FLT) share price is on the rise on Thursday.

In morning trade, the travel company’s shares are up 0.5% to $21.82.

Why is the Flight Centre share price rising today?

Investors have been bidding the Flight Centre share price higher today following the release of a promising announcement this morning.

According to the release, Flight Centre has launched an innovative new joint venture with Goldman Travel and the Spencer Group focused on premium and business travel.

The joint venture, named Link Travel Group, is an invitation-only members’ group dedicated to partnering with high quality travel companies to provide an innovative and compelling offering via travel supply, technology, and business operations.

The release reveals that Flight Centre will initially hold a 60% interest in the joint venture and will provide Link members in both the high-end leisure and corporate sectors with a range of services. This includes access to its leading product and distribution capabilities at a time when considerable change is taking place.

Goldman Travel’s joint managing director Anthony Goldman and Spencer Group founder Penny Spencer will sit on the joint venture’s board of directors. This will be alongside Flight Centre’s Danielle Galloway, who is the executive general manager of the company’s premium brands.

An independent general manager, Scott Darlow, has been appointed to oversee the business’ day-to-day operations.

“Create change in the Australian travel industry”

Flight Centre’s Danielle Galloway spoke very positively about the joint venture. She commented:

“Link will create change in the Australian travel industry. Our combined goal is to shape the future of travel by uniting the industry’s progressive thinkers As invitation-only partners, businesses will benefit by leveraging Australia’s largest travel agency group, while maintaining their own powerful brand identity and independence.

‘We look forward to welcoming members to our exclusive Link Travel Group. We are also delighted to have secured Scott as our inaugural general manager. He is highly regarded nationally by both suppliers and agents alike and with high level experience across multiple agency business models, he knows which ones work the best for all parties.”

No financial details have been provided. Though, given that the announcement was not labelled as price sensitive, the joint venture looks unlikely to move the needle in the immediate term.

The post Flight Centre share price higher amid premium and business travel joint venture news appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: ANZ higher on results, Flight Centre and JB Hi-Fi sink following updates
• Flight Centre share price slips despite return to profitability
• These are the 10 most shorted ASX shares
• Travel’s back! 3 ASX shares this expert loves right now
• Why is the Flight Centre share price trouncing ahead of the ASX 200 today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Qantas Airways Limited (ASX: QAN) share price is back in focus today after its latest big announcement. Australia’s largest airline is set to become even larger as it looks to fully acquire Alliance Aviation Services Ltd (ASX: AQZ).

Qantas shares are swapping hands at $5.58 in early morning trade, a fall of 1.59%. The airline operator’s shares have been making a resurgence since the new year ticked over. Notably, the share price is up by around 9%, while the broader market is still in the red year-to-date.

Meanwhile, the Alliance Aviation share price is soaring this morning, up 26.5% to $4.44 at the time of writing.

Let’s take a look at what this deal entails.

Big deal for competition in the air

Investors will be attempting to revalue the Qantas share price today as the airline makes a play at gobbling up air charter services operator, Alliance.

According to the release, the two companies have entered into a scheme implementation deed for Qantas to acquire the remaining 80% or so shares on issue.

The agreed-upon consideration is one Qantas share at $4.75 per Alliance share. This represents a 35% premium to the $3.51 Alliance share price at yesterday’s close. Additionally, it values the fly-in, fly-out operator at an enterprise value of $919.2 million.

Under the terms of the deal, Alliance will be permitted to pay out one or more cash dividends before the scheme becomes effective. However, any dividends paid out to shareholders will reduce the total consideration appropriately.

Importantly, the deal will need to get the all-clear from the Australian Competition and Consumer Commission — an objective that might be difficult considering the fuss generated when Qantas took a 19.9% stake in Alliance back in 2019.

The Qantas share price is essentially flat since it acquired its initial interest in Alliance.

What is management saying?

The smaller airline operator is keen on making the deal happen. Indicating this, Alliance chair Steve Padgett said:

Our three core principles of safety, operational excellence (reflected in market leading on-time performance) and profitability have underpinned our success. Qantas is Australia’s national carrier and has been operating for more than 100 years. It has a consistent approach to business and would be a quality ongoing owner of our business.

Meanwhile, Qantas CEO Alan Joyce highlighted that the acquisition would mean an improved QantasLink, better positioned to compete in a highly competitive market.

What’s next for the Qantas share price?

From here, the acquisition will be subject to competition clearance, an independent review on behalf of shareholders, Court approval, and shareholder approval.

Furthermore, Alliance said an update with more details will be provided in time. In the meantime, the deal carries a $7.6 million break fee to Qantas if Alliance walks away.

Qantas boasts a market capitalisation of $10.69 billion based on the current Qantas share price.

The post Qantas share price stalls amid Alliance Aviation acquisition appeared first on The Motley Fool Australia.

More reading

• Qantas share price lower amid Federal Court loss
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• Here are the 3 most heavily traded ASX 200 shares on Monday

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alliance Aviation Services Ltd. The Motley Fool Australia has positions in and has recommended Alliance Aviation Services Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BWX Ltd (ASX: BWX) share price has come under pressure on Thursday.

In morning trade, the personal care products company’s shares are down 22% to a multi-year low of $1.45.

Why is the BWX share price being hammered?

Investors have been selling down the BWX share price today after the company’s FY 2022 guidance fell well-short of the market’s expectations.

When BWX released its half-results in February, it told the market it expected to deliver strong underlying revenue and EBITDA growth in FY 2022. However, it expected this growth to be weighted to the second half.

While this is always a bit of a red flag, the market appeared confident BWX would deliver on its guidance and was forecasting strong full year earnings and revenue growth.

However, as you might have guessed from the BWX share price performance today, the company’s second half has not gone to plan.

What did BWX say?

BWX advised that it expects FY 2022 underlying revenue to be in the range of $240 million to $250 million for FY 2022. This will be up 24% to 29% year on year, driven by positive performance from Sukin and Mineral Fusion but impacted by the underperformance of its digital businesses.

As for earnings, the strong growth that was promised in FY 2022 is non-existent after its earnings went backwards in the second half.

BWX now expects to report underlying EBITDA in the range of $34 million to $37 million. This represents a decline of 1.5% to growth of 7% on FY 2021’s EBITDA of $34.5 million.

Management advised that this reflects the impacts of a higher operating cost base, and recent acquisition investments not yet meeting growth expectations. In addition, the company notes that freight and supply chain costs are substantially higher than the prior corresponding period due to COVID impacts.

Refreshingly, the company isn’t hiding from its underperformance like many companies do. For example, it has provided the market with analyst consensus estimates to compare its performance against.

It notes that analysts were expecting revenue of $261 million (up 34%) and ETBIDA of $45.1 million (up 31%). As a comparison, the top end of BWX’s guidance range is revenue of $250 million and EBITDA of $37 million.

Management commentary

BWX’s new CEO, Rory Gration, was disappointed with the half. He also revealed plans to reduce the company’s cost base to a more sustainable level. Mr Gration said:

“BWX’s instore revenue performance has accelerated from 1H22 and the business is supported by strong brands and an ability to scale distribution in key markets and sales channels. Initiatives for reducing our cost base are a key priority, supported by improved visibility and cost controls to ensure sustainable revenue growth.

“With less distractions across the business, the team is focused on streamlining and simplifying our operating model to ensure BWX can continue to grow in a sustainable and profitable way – we look forward to sharing more details at our upcoming Investor Day.”

The post Here’s why the BWX share price is crashing 22% to a multi-year low today appeared first on The Motley Fool Australia.

More reading

• Brokers: 2 beaten-up ASX shares to buy next month

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BWX Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BHP Group Ltd (ASX: BHP) share price has kicked off May 2022 in the red. What is the outlook for the company for the rest of the month and beyond?

Without a crystal ball, it’s impossible to know what a company’s share price is going to do on any day, week, month or even year.

Over the last month, BHP shares have fallen more than 9%, and since the beginning of May, have drifted lower by more than 1%.

What do analysts think of the BHP share price?

One of the latest ratings comes from UBS. It is ‘neutral’ on BHP with a price target of $43. That implies a potential decline of another 9%.

UBS notes BHP’s reduction in production and the prospect of elevated costs. While commodity prices have been strong recently, the broker is expecting prices to fall.

However, some brokers remain positive about the business. For example, Morgans rates the business as a buy, with a price target of $54.30. It thinks that strong prices for BHP’s resources are a stronger positive than the headwinds that BHP is facing.

Citi also rates BHP as a buy, with a price target of $56. The broker is attracted to BHP’s high level of profit and cash flow thanks to elevated commodity prices.

What happened in the latest quarter?

BHP reported a drop in production by its key iron ore division.

The three months to 31 March 2022 showed a 10% decline in production to 59.7mt, compared to the same period to 31 December 2021. BHP blamed the lower volume at its Western Australian iron ore operations on temporary labour constraints due to COVID-19, train driver shortages and planned maintenance activities.

Copper production volume was 1% up quarter on quarter, but down 10% in the year-to-date.

Nickel production volume was down 13% both quarter-on-quarter and year-on-year.

Production guidance for FY22 remained unchanged for iron ore, metallurgical coal and energy coal.

However, full-year total copper production guidance has been lowered to between 1,570kt to 1,620kt, reflecting lowered production guidance for Escondida.

The full-year nickel production guidance has been lowered to between 80kt to 85kt due to COVID-19 related labour constraints.

What next for the BHP share price?

Commodity prices are almost impossible to predict.

BHP has just divested its interest in BHP Mitsui Coal to Stanmore Resources Ltd (ASX: SMR). Stanmore paid a US$1.1 billion cash consideration at completion, plus a preliminary completion adjustment of approximately US$200 million for working capital.

US$100 million cash remains payable to BHP in six months with the potential for an additional amount of up to US$150 million in a price-linked earnout payable to BHP in the 2024 calendar year.

Completion of the proposed merger of BHP’s oil and gas portfolio to Woodside Petroleum Limited (ASX: WPL) is targeted for 1 June 2022.

BHP valuation

BHP is valued at under 8x FY22’s estimated earnings, using UBS numbers.

Morgans thinks that BHP is valued at around 9x FY22’s estimated earnings.

On Citi’s numbers, the BHP share price is valued at 7x FY22’s estimated earnings.

The post What’s the outlook for the BHP share price in May? appeared first on The Motley Fool Australia.

More reading

• Analysts name 2 inflation-beating ASX dividend shares to buy
• ASX 200 mining shares slump, dragging index into the red
• Here’s how some of the biggest ASX 200 shares are responding to the RBA’s rate rise
• The BHP share price has lost 10% in 2 weeks. Here’s why this expert is tipping a recovery
• What’s the outlook for ASX 200 mining shares in May?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of electric car manufacturer Tesla (NASDAQ: TSLA) dipped 2.2% in late morning trading Wednesday, down 2.2% as of 11:30 a.m. ET.

The dip erased Tesla’s gains from Tuesday, which came as investors digested some positive production news from Tesla’s China gigafactory.

So what

The most likely culprit for Tesla’s decline today is simply volatility. The whole stock market is pretty much in the red today, and the tech-heavy Nasdaq in particular (many investors consider Tesla more of a tech stock than an automotive stock) is down 1.4%. It makes sense that if investors are nervous about tech, they’d also be nervous about Tesla stock, which at a recent valuation of 122.5 times earnings is quite pricey.

That being said, there’s also some substantive news today that may be unnerving investors.

Tesla, as is well known, wants to grow its car production numbers from just under 1 million units last year to as many as 1.5 million units this year. To do that, it’s opened two new gigafactories already just this year, one in Texas and another in Germany. But as electrek.com reports today, an environmental group in Germany called “the Green League” has filed a complaint with a German court, demanding that Tesla’s operating license in Germany be revoked based on a reported paint leak at its factory.

Now what

With Gigafactory Berlin expected to eventually produce 500,000 cars per year, this is a monkey wrench that Tesla’s production plans did not need — but a close review of the complaint reveals that it probably won’t be a huge problem.

As electrek notes, out of “15,000 liters of a paint mixture” that were “pumped out by a disposal company” from Tesla’s factory, “two to three liters” of the “slightly hazardous to water” paint mixture leaked onto an access road, and then … “the paint did not get into the sewage system or groundwater” (emphasis added).

So Exxon Valdez this is not. While the Green League is insisting Tesla should be required to pave areas around its paint shop to ensure any future leaks can’t get into the ground water, this sounds like an easy fix. I seriously doubt it’s going to have any lasting impact on Tesla’s German production…or Tesla’s stock price, either. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla stock dropped this morning appeared first on The Motley Fool Australia.

More reading

• Why Tesla stock popped on Tuesday
• Why Tesla stock dropped, then popped on Monday
• Elon Musk just sold $5.6 billion of Tesla shares. What’s the deal?
• Why Tesla stock is bouncing back today
• Why Tesla stock just crashed 7%

Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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