Arthur J. Villasanta – Fourth Estate Contributor
New York, NY, United States (4E) – Multinational investment bank and financial services company Goldman Sachs is encouraging its clients to sell their stock in Tesla, Inc convinced the electric car maker can’t make good on its production target of 5,000 Model 3 sedans per week.
“We believe the sustainable production rate for the second quarter of 2018 is most likely below the 2,000 vehicle mark the company achieved in the final week of the (first) quarter,” said Goldman in its analysis. “We see the company likely sustaining Model 3 production around the 1,400 per week mark.”
Tesla’s share price is closely related to Model 3 production but fell three percent this year because of repeated production delays. To head-off capita flight, Tesla reiterated its production target of 5,000 Model 3 sedans per week by the end of June. Tesla shares jumped by as much as 20 percent at the announcement.
Despite this optimistic bit of news, Goldman remains unconvinced Tesla will meet this production target. It based its pessimism on persistent production bottlenecks that make it difficult for Tesla to keep producing 1,400 sedans per week, which is what Tesla is capable of now. Goldman reiterated its sell rating and cut its 12 month price target to $195 from $205. It predicts Tesla will be forced to raise additional capital by the third quarter to finance production of the Model 3.
“Although the company stated that is does not require a capital raise this year, we note that this is predicated upon a sustained 5,000 per week production rate achieved exiting the second quarter of 2018,” said Goldman analyst David Tamberrino. “Beyond a required capital raise to continue to fund the launch of the Model 3 program, the company would likely still need outside capital in the future for capacity and product expansion.”
Tesla CEO Elon Musk derided Goldman’s gloomy forecast. He also called-out Goldman after the bank encouraged investors to sell the carmaker’s stock.
“Place your bets,” tweeted Musk in response, challenging would-be sellers to exit at their own risk.
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