Goldman Sachs downgraded Tesla stocks on concerns that are related to the upcoming Model 3 due to which its shares closed down by 4% on Monday.
David Tamberrino, a Goldman Sachs analyst, hit a sell rating on electric car automaker and also lowered his target price from 190 dollars to 185 dollars. Shares of Tesla closed down $10.77 a share at $246.23.
There are a lot of potential issues, which have influenced the downgrade of Tamberrino. Many of them are related to Tesla’s launch of Model 3, their first mass market electric car. Currently, Tesla sells just two luxury vehicles – Model X crossover and Model S sedan.
Analysis of Tamberrino includes possibility of launch of Model 3 delayed, which is currently planned to release in summer. Further, the concerns of the integration of Tesla’s SolarCity could drain their financial resources.
There has been a drop of 11% from their high of $280 on February 13.
Tesla has been rapidly expanding the Gigafactory in Nevada where the company is going to make their car batteries and other electricity storage products and that factory may be joined by three more multibillion dollar factories.
The CEO Elon Musk, in addition to leading SpaceX and Tesla, is on two business advisory councils of President Trump, a move that he defended by saying he preferred having a dialog with new administration even after he disagreed with their recent immigration ban.
Out of all the current projects by Musk, the launch of Model 3 represents critical crossroads for this automaker. Elon Musk projects about 500,000 units per year, which is tremendously up from the number of Model X and S sedan units i.e. 80,000.
A brand equity aura has been created by Tesla with their fast and high-tech 100,000 dollar sedans, which could help lure the consumers to their smaller similarly-styled Model 3.
In case of a delay in the production, rival automakers like Nissan, General Motors, and others get a chance to pounce first with their entry level EVs.
The stable price of oil is also a potential lag on the adoption of entry level EVs by consumers.
Elon Musk has also been tackling with accusation from Jose Morgan, who posted a blog post recently, which detailed the bad working conditions at Tesla’s manufacturing facility at Freemont, California.
Musk, in an email to the employees last week, said that the charges by Morgan were unfounded and also urged workers not to join the union of United Auto Workers promising that there would be future improvements to the factory life, including roller coaster and frozen yogurt.
If Tesla includes a lot of caveats, then Tamberrino still would see a profitable way for Tesla in coming time.