Tesla Gets Hit With Poor Rating From Goldman Sachs

Jun 20, 2019
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Today Goldman Sachs (NYSE:GS), one of the world’s largest investment banks and financial services firms, slashed its price target on Tesla (NASDAQ:TSLA) citing uncertain demand for the company’s electric vehicles.

Tesla might hit record production in the second quarter but Goldman Sachs believes the future isn’t as rosy

Earlier this month Tesla CEO Elon Musk led a meeting for shareholders in California. At that same meeting, Mr. Musk alluded to Tesla possibly achieving an “all-time record” in terms of vehicles sales for the second quarter of 2019.

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The company’s current record was marked in the final quarter of 2018 that saw Tesla deliver just over 90,000 electric cars and SUVs in total, but the first quarter turned out to be quite difficult with sales dropping by 31 percent.

Just after the investor meeting a leaked internal email from Elon found its way to the press and seemed to confirm that deliveries are looking strong for Q2.

As of yesterday, we had over 50,000 net new orders for this quarter. Based on current trends, we have a good chance of exceeding the record 90,700 deliveries of Q4 last year and making this the highest deliveries/sales quarter in Tesla history!

Despite the potentially solid quarter, Goldman Sachs believes this level of demand isn’t sustainable. “While there is potential upside surprise from a faster ramp or pull forward of Model Y ahead of schedule, there is likely cannibalization of current Model X and Model 3 product demand with a crossover variant,” analyst David Tamberrino wrote in a note to clients Thursday.

In other words, Model Y buyers might not be completely new-to-Tesla customers but people that are already cross shopping another Tesla model. Importantly, Tamberrino and his fellow analysts think that Tesla will hold steady at a 20 percent stake of the total EV market, despite Tesla’s new additions to its lineup.

Goldman Sachs, as a result of the questions surrounding Tesla’s ability to sustain current levels of demand, has thus slashed its price guidance on shares of the company down 21 percent to $158 from its previous PT of $200. The analysts believe the market is currently way too bullish on Tesla’s future and its revised PT of $158 is good for a 28 percent discount from the market as of today.

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