While Tesla (NASDAQ:TSLA) has retained its upward momentum for a while now, news this morning appears to be letting air out of its tires. A new update on the Hertz (OTCMKTS:HTZZ) deal is not necessarily a bearish one. However, it is preceding what investors believe to be a much larger issue. A Tesla recall alert is sending the stock tumbling through the morning, even as bulls try to pass the news off as more minor than it appears.
Setting the scene for the recall news was a tweet from Elon Musk; the post seems to be sowing more confusion than clarity. The CEO, never one to disengage from investors, made a quick reply to one user who was impressed by Tesla’s gains at the market’s close yesterday. Musk made a clarifying statement, telling his followers that a Hertz deal has not yet been signed. Of course, he was referring to the news that Tesla would be selling 100,000 cars to the auto-rental company.
The news aided Tesla in a bullish run that ultimately took its total market capitalization past the $1 trillion milestone. Yet, according to Musk, “no contract has been signed yet.” The news had investors slightly concerned, although the general consensus seems to be that Musk was making this statement to ensure investors that the deal is not indicative of any demand volatility. In fact, Musk closes his post by mentioning that Hertz is buying the cars at full retail price.
Tesla Recall Alert Proves More Damaging Than Hertz Clarification
This confusion, if not already resolved, is being pushed to the wayside in favor of much more obviously bearish news. This morning, TSLA stockholders are waking up to news of a Tesla recall alert. This alert is the real reason why TSLA is trading in the red to start the day.
A variety of vehicles, including Model Xs, Model Ys, Model 3s and Model S’s are being recalled today. The recall spans a total of 11,700 cars. According to the company, the issue is a communications error between the software and the vehicles themselves, potentially causing the emergency brake system to unexpectedly activate.
TSLA stock is beginning the day by trading down as a result of the early morning recall news. The stock, while trading down in pre-market and dropping by 4% at open, is already rebounding slightly, though; it’s climbing back to a loss of just 1.5%.
This clawing back upward is partially the result of Tesla bulls’ efforts to assure investors that the news isn’t a huge deal. Tesla blog Teslarati reports that the company is already working to fix the issue. A report from the site says Tesla is implementing an over-the-air software update; this should fix the software problem without needing to actually physically recall the vehicles.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.