Tesla Motor’s shares have been downgraded in value by Goldman Sachs over fears that the potential delay of the soon to come Tesla Model 3 might be detrimental to the company’s efforts and share price. The shares for the electric car making company were downgraded from buy to neutral by the investment bank.
Goldman revealed the news in its Americas: Automobiles magazine, where it wrote that they were also going to lower down their 6 month price target for the company from $240 to $185. In the report, the investment banking firm noted that there was an incremental risk to the business that was in itself related to the management deployment of capital for various mergers and acquisitions. The report also notes that any further plans to postpone the launch of the Tesla Model 3 will be nothing short of detrimental to the shares of the car making company.
There has been a solid third quarter sale of cars by the company, and there is also the potential of a missed deadline for the eagerly awaited Tesla Model 3 which would be pushed to the second half of 2017. Because of all this, the reports says that they would rather be neutral when it comes to the shares.
Earlier, when the year started, the Tesla CEO, Elon Musk, warned that there was going to be a small equity capital raise, that would help in the funding of the Tesla Model 3 production and also help with the building of its massive gigafactory. The company is under fire lately for ‘burning’ cash for no reason, and at the same time they are also working on purchasing solar panel manufacturer, SolarCity, a company that is also chaired by Musk.
The bank noted that the combination of the two companies meant that two firms of high growth and high cash burning ability would all be together. The bank says that this is a high risk entity considering the combined ongoing capital requirements for both firms and the higher net leverage that would come as a result of the merger.
The bank also explained why they feel Tesla will not get into the red and why they had not put a negative for the company. In the report, they wrote that in the near future they saw Tesla achieving positive earnings per share ratio in the third quarter of 2016, which has been driven by the company’s second half of 2016 guidance.
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All of this puts the updated EPS value at $0.28 and means it is above $0.07. The company has also raised the estimates considering the Tesla Energy business which has driven the net positive increase from 2016 to 2019.
