Tesla slides as Goldman says sell on Model 3 launch concerns
Shares of Tesla (TSLA) are slipping after Goldman Sachs analyst David Tamberrino downgraded the stock to Sell, citing concerns over the execution of its Model 3 launch, the company's solar business and its cash needs. The analyst argued that a delayed launch may weigh on Tesla's shares. MODEL 3 CONCERNS: In a research note this morning, Goldman Sachs' Tamberrino downgraded Tesla to Sell from Neutral and lowered his price target on the shares to $185 from $190. The analyst told investors that while Tesla currently has a lead relative to OEM peers with respect to vehicle technology adoption, electric vehicle architecture, and battery scale, his concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an "unproven" solar business, and cash needs. Tamberrino pointed out that he believes Tesla's Model 3 will have a "more subdued" launch curve than the company is targeting as some suppliers have expressed concern around final designs not being locked down. The company should achieve mass market volumes in the fourth quarter of 2018 versus Tesla's target of this year's fourth quarter, he contended. Additionally, the analyst argued that historical operational execution also points to a more gradual production ramp than Tesla is guiding. Tamberrino noted that he sees a delayed launch and the company's free cash flow burn rate likely leading to a capital raise before the fourth quarter, weighing on the company's shares. POTENTIAL TAX BENEFITS AHEAD: Goldman Sachs' Tamberrino also told investors that he expects Tesla to be a net beneficiary of potential U.S. tax changes under the new Trump administration and forecasts its net operating losses, or NOLs, to grow under a potential tax change scenario. However, the analyst said he finds that the net present value of these higher NOLs is slightly worse than the status quo given a longer time period to achieve, and therefore sees part of the recent strength in shares given potential tax change to be "unwarranted." WHAT'S NOTABLE: Transportation Secretary Elaine Chao said she is "evaluating" the Obama administration's guidance on autonomous vehicles, according to a Reuters report over the weekend, citing statements given by Chao to the National Governors Association. The guidelines issued in September called for the voluntary submission of details on autonomous driving systems and urged states to defer to the federal government on most vehicle regulations, prompting criticism from carmakers who said it could delay testing, the report added. "I want to challenge Silicon Valley, Detroit, and all other auto industry hubs to step up and help educate a skeptical public about the benefits of automated technology," Chao said. PRICE ACTION: In morning trading, shares of Tesla have dropped 5% to $244.29.