Tesla Inc. bonds have joined the company’s shares in the doldrums recently, as the Silicon Valley car maker gets closer to reporting quarterly sales and production.
The 5.300% notes, which mature in 2025, were trading at 92.53 cents on the dollar on Friday to yield 6.592%, according to trading platform MarketAxess. On a spread basis, they were 19 basis points wider on the week, and 376 basis points above comparable Treasurys.
Despite the lower levels for the bonds, they compared favorably to similar debt by other car makers.
The debt, Tesla’s first pure bonds, was sold in August, at the height of excitement about the Model 3 and amid lofty company promises for the mass-market car’s production ramp, promises the company has had to dial back. The bonds fell under par within a week of issuance.
Tesla TSLA, -2.45% shares have struggled in March, but have outperformed market benchmarks over the longer term.
The stock is off nearly 11% this month, which is shaping up to be its worst since January 2016, when it fell more than 20% and roughly tying with July’s 10.6% losses. The S&P 500 index SPX, -2.10% is off 2.5% this month.
Over the past 12 months, however, the stock has climbed 22%, compared with a 14% gain for the S&P 500 and an 18% rally for the Dow Jones Industrial Average. DJIA, -1.77%
Bond yields have been broadly lower recently as the market struggled to decode U.S. Federal Reserve action earlier. See Bond Report.
The Fed on Wednesday lifted short-term rates a 25 basis points, or 0.25 percentage points, to a range of 1.50% to 1.75%, as expected, but the central bank kept its projections for the number of rate hike this year at three, instead of the four that some had anticipated.
nvestors are worried about Tesla’s cash burn, which affects the company’s ability to service its debt, and that the company is constantly falling short of its goals, said Trip Miller, Trip Miller, a managing partner at hedge fund Gullane Capital LLC.
“The market is getting a little worried especially in a rising interest rate environment,” Miller said.
Rising interest rates aren’t the only big-picture market headwinds for Tesla and other companies.
The ongoing fears of trade wars underway are generally negative for companies that, like Tesla, make things, said Robbie Goffin, a managing director with FTI Consulting.
The good news for Tesla, for when the company does return to the bond market, is that the company still has relatively little debt, and its sheer market cap provides an equity cushion that lenders like to see, he said.
Also on the positive side, the August bonds are now a benchmark issue for the company, and markets would welcome an additional benchmark issue that would create a curve for investors to trade in and out, Goffin said.
Investors are bracing for Tesla’s first-quarter delivery and production numbers in early April. The company reported disappointing fourth-quarter delivery numbers earlier this year, and pushed back for a second time the goal of producing Model 3s at a rate of 5,000 a week.
It said it would reach that target by the end of the second quarter, a goal it reiterated when it reported fourth-quarter earnings on Feb. 7.
Tesla had said it would get to 5,000 Model 3 sedans a week in 2017 and then on to 10,000 a week in 2018, but soon pushed back its 2017 goal to late in the first quarter of 2018, putting pressure on the company’s cash position.
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Earlier this week, analysts at Goldman Sachs said they expect Tesla to miss first-quarter production and delivery goals for the Model 3, and even missing some of the marks with Model S and Model X. The analysts, known Tesla bears, kept their rating on the stock at sell.
Unlike other car makers, Tesla does not report monthly sales and production numbers, or break the data down by region. It reports quarterly deliveries, its proxy for sales, and production a few days after the end of the quarter, and breaks down the data by model.
Tesla is expected to report the first-quarter delivery and production details around April 3. The Goldman analysts said they expect deliveries are likely to clock in around 7,000 for the quarter.
Analysts polled by FactSet expect Model 3 deliveries around 13,800 for the three-month period. For Model S and Model X, the expectations are 13,300 and 11,800 for a total of 38,900 vehicles delivered.
Also this week, analysts at Bernstein said that many of Tesla’s biggest fans — current owners of Model S and Model X vehicles, who are among the first to be offered an opportunity to buy the Model 3 — have passed on their chance to buy a Model 3.
The company last month sold $546 million in debt backed by lease payments on Model S and Model X, tapping the asset-backed securities market for the first time.
