Tesla’s shares tumbled Monday after Goldman Sachs downgraded the company due to concerns about the company’s recent merger with financially-strapped solar panel provider SolarCity.
The California-based automaker has done good work on producing electric vehicles, but “our concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs,” David Tamberrino, an analyst with Goldman Sachs, wrote in a memo announcing the decision to sell Tesla.
Tamberrino was also worried the company would have to sell stock to raise $1.7 billion to make room for a possible loss if the Model 3 doesn’t make the grade. The financial institution ultimately downgraded the company from “neutral” to “sell.”
Tesla has traded between $180 and $280 recently, but Goldman Sachs’ sell grade pushes the company’s stock toward the bottom of that range, he added. The highly-leveraged company is still up 14 percent in 2017.
Still, Wall Street analysts are getting wobbly-kneed on Tesla – seven analysts have recommended selling the company’s shares, while six are maintain their “buy” rating. Stocks rarely attract more “sell” than “buy” ratings.
Tesla’s SolarCity merger complexity almost certainly played a part in Goldman Sachs’ position. Prior to the merger, auto analysts covered the electric vehicle maker, but now, energy analysts are jumping in the fray.
Neither of these industries are likely to have a logical meeting point upon which to make an accurate forecast. Mixed in will be the energy-storage and battery-manufacturing components of the company.
SolarCity’s bizarre business model will also scare away the bullish of bulls.
The solar panel provider, which leases its panels to customers, has reached long-term lease agreements with homeowners before they defaulted on the mortgages, according to a Feb. 22 report from The New York Times. There could be even more default cases, the report notes.
Mohammed Ahmed Gangat, a lawyer for beleaguered company, argued in September 2016 that the company needed to file a document late to a New York court because it had been “inundated” with thousands of lawsuits across the country, all of which named SolarCity as a defendant in foreclosure actions.
Recent reports also indicate Tesla’s small output in relation to the rest of the auto market could lead to its unraveling.
A Bloomberg report published last week suggests analysts are expressing doubt Tesla can accomplish its lofty goals — in particular, they think GM and Ford will eat the fledgling electric vehicle maker alive. It’s the most pessimistic view Wall Street has made on Tesla since the company went public in 2010.
One reason for concern is Tesla’s comparatively poor sales numbers compared to big hitters Ford and General Motors, both of which sell millions of cars a year — the California-based vehicle maker delivered fewer than 80,000 vehicles in 2016.
Elon Musk, Tesla’s chairman, has promised to deliver between 100,000 and 200,000 Model 3s to the market in the second half of 2017. Analysts are clearly dubious.
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