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Goldman Sachs Remains 'Guarded' on Tesla (TSLA) Despite Progress; Analyst Says Company May Need Additional Capital

September 19, 2014 9:01 AM EDT
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Price: $173.80 +6.25%

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(Updated - September 19, 2014 9:33 AM EDT)

Goldman Sachs maintained a Neutral rating on Tesla Motors (NASDAQ: TSLA) with a price target of $210. Comments follow meetings with management and a tour of its Fremont, CA facility. Analyst Patrick Archambault noted major progress, but he remains cautious given questions about the timing and capital needs of its new gigafactory.

"On balance, the plant tour was positive with Tesla on track to meet its 2014 production objectives. What keeps us more guarded is the aggressive timetable of the gigafactory as well as a potential escalation of capital needs given the planned capacity ramp, model and derivative expansion, service expansion as well as other undisclosed projects. So with 3Q likely to be a noisy quarter and shares seemingly baking in flawless execution at present, we remain sidelined for now," said Archambault.

Update: Traders are buzzing about comments made by Goldman that were in a separate part of the same report related to a potential capital raise.

"With numerous projects laid out (as well as those not currently communicated) ahead for TSLA, we see a possible need for additional capital. In the near term (end of 2014 through 2015) projects include upgrading the paint and body shops for Model S and Model X, continued Model X development/launch spending, and initial gigafactory costs. Into 2016, spending for the gigafactory accelerates and Model 3 spending begins. Beyond that, there will be incremental follow through capital deployment related to the Model 3 and gigafactory. TSLA management has noted that the company could self-fund these amounts but would consider external funding depending on its growth cadence and other projects it takes on. For example, at the low end of our three disruptive scenarios for TSLA, we see the need for an additional $6bn in capital," said Archambault.

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $263.82 yesterday.



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