Analysts: Tesla Needs To Stop Over Promising & Under Delivering
Tesla shares are down and many analysts are preaching about the same issues related to the automaker, which comes as no surprise, but ratings haven’t really changed.
According to Reuters:
“Four major houses – including Goldman Sachs and JP Morgan – cut their price targets by $5-$10 after the electric carmaker reported its worst ever quarterly loss and pushed back production targets for its Model 3 vehicle by three months.
While shares in Silicon Valley star Musk’s venture were still up 50 percent for the year, reflecting faith in its positioning as a major future manufacturer, the company’s share price has now retreated 23 percent since mid-September.”
Perhaps it seemed to some that the Model 3 would be different. There was a belief out there that Tesla may have turned a corner. We’ve reported about many a bullish forecast in the recent past. The automaker’s more affordable mass-market electric car arrived on time and the already ridiculous level of excitement accelerated to absurd. Deep down inside, however, many probably knew it may be too good to be true. Nonetheless, Tesla remained popular on Wall Street.
Thursday, Tesla stock fell over 6 percent (real-time quote here), but ratings still remain nearly the same. Of 24 brokerages, 7 say sell. Back in May, it was 6 of 21. Six months ago, 7 recommended buying the automaker’s stock, and now that number has gone up to 8. However, the ratings don’t necessarily tell the whole story. Cowen and Co told analysts in a note:
“Tesla needs to slow down and more narrowly focus its vision and come up for a breath of fresh air. Elon Musk needs to stop over promising and under delivering.”
The different houses were still quite divided about whether or not Model 3 production issues are truly worked out, as well as the automaker’s future cash situation. Berstein’s Toni Sacconaghi, who has a price target of $265 and a “market-perform” rating, wrote:
“With Tesla’s cash drain growing and production and gross margin visibility low, we see TSLA as a show me story. (It) is clearly still struggling with production issues.”
Goldman believes Tesla will have to raise more capital yet again by the second quarter of 2018. The broker recommends selling Tesla shares due in part to Musk’s statement that the automaker will not begin financing efforts in China until after 2019. There was an assumption that that automaker would be making progress in China in the near future.