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Tesla Shares Plunge 5% As Goldman Sachs Says “Sell”

From Tesla Inc (NASDAQ:TSLA) shares plunged as much as 5% in early trading Monday, after analysts at Goldman Sachs downgraded the stock to a Sell amid cash position and execution risk concerns.

The firm cut its rating on TSLA from Neutral to Sell and lowered its price target from $190 to $185. That new target suggests a massive 28% downside to the stock’s Friday closing price of $257.00.

Goldman analyst David Tamberrino explained the investment rationale in a note to clients:

“While we believe Tesla currently has a lead relative to OEM peers with respect to vehicle technology adoption, electric vehicle architecture, and (potentially) battery scale, our concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs. Ultimately we see a delayed launch (pushing volume growth out and to the right) and FCF burn rate (necessitating a capital raise before 4Q17) to weigh on TSLA’s shares.”

To get bullish on Tesla again, Goldman says it would need to first see better manufacturing execution, more synergies derived from its SolarCity deal, and lower costs that lead to reduced capital requirements:

We would become more positive on the stock if the company were able to demonstrate improved manufacturing execution by driving more rapid quarterly production growth in its current vehicle offerings than we model, demonstrate key milestones implying its Model 3 launch remains on track for mass volume in 2H17, drive down the cost of its battery packs faster than expected, demonstrate considerable market demand for the cross-selling between Tesla products and SolarCity products, and deploy capital more efficiently – driving reduced incremental capital requirements.

Tesla Inc shares fell $7.02 (-2.73%) in premarket trading Monday. Year-to-date, TSLA has gained 20.27%, versus a 5.91% rise in the benchmark S&P 500 index during the same period.

TSLA currently has a POWR Rating of B (Buy), and is ranked #12 of 25 stocks in the Auto & Vehicle Manufacturers category.

Tesla Inc (NASDAQ:TSLA) was trading at $244.38 per share on Monday morning, down $12.62 (-4.91%). Year-to-date, TSLA has gained 14.36%, versus a 5.90% rise in the benchmark S&P 500 index during the same period.

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