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Tesla Shares Fall on Big Goldman Sachs Downgrade

Thursday, October 6, 2016 5:49
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Tesla logoElectric automaker Tesla Motors Inc (NASDAQ:TSLA) received some bearish commentary from analysts at Goldman Sachs today, sending its shares sharply lower.

The firm downgraded TSLA from Buy to Neutral and slashed its price target from $240 all the way down to $185. That new target suggests an 11% downside to the stock’s Wednesday closing price of $208.46.

Goldman cited several increasing risks for the move, including “management’s deployment of capital for mergers and acquisitions (M&A), and further believe that any delay in the company’s timeline to launch its new Model 3 will be detrimental to shares.” Tesla’s new crossover SUV, dubbed the Model 3, is slated to be released in late 2017, but reports suggest that most buyers won’t receive their vehicles until 2018.

“With solid third-quarter 2016 deliveries and the potential downward catalyst of a missed Model 3 launch timeline out in the second half of 2017, we prefer to be neutral on shares,” said the analyst in its Americas: Automobiles report.

Along with potential car delays, Goldman isn’t very bullish on Tesla’s impending merger with SolarCity. The firm noted that the “two high growth, high cash burn businesses,” when combined, create “a higher risk entity given the combined ongoing capital needs and higher net leverage that would potentially result.”

On a positive note, Goldman did raise its Q3 EPS estimate for the company to $0.28, which is significantly higher than the Wall Street consensus view of $0.07. “Additionally, we raise our estimates to fully incorporate the Tesla Energy business – driving a net positive increase to our 2016 through 2019 EPS estimates,” said the analyst.


Tesla shares fell $5.66 (-2.72%) to $202.80 in premarket trading Thursday. Year-to-date, TSLA has fallen 13.15%.

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