Tesla (TSLA) Rated 'Underperform' at Cowen on Concerns More Can Go Wrong Than Go Right
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(Updated - September 8, 2016 7:47 AM EDT)
Cowen made a cautious call on Tesla Motors (NASDAQ: TSLA) and initiated coverage on the stock with an Underperform rating and a price target of $160. Analyst Jeffrey Osborne highlighted execution risk and Tesla's capital needs as reasons for the Underperform rating. He also discussed the stock's asymmetric risk/ reward profile.
"Simply, we see a lot more that can go wrong than can go right as the company transitions into Mr. Musk’s greater vision as laid out in his Master Plan, Part Deux. We see the potential for delays in the introduction of the Model 3, ramp of the Gigafactory and integration of SolarCity leading to increased cash burn levels," said Osborne.
"The company, while fundamentally well positioned for the long term, has a material amount of execution risk over the next 12 to 18 months. The SolarCity acquisition only adds an additional layer of complexity at a crucial time when the company should be focused on the Gigafactory ramp and Model 3 launch," continued the analyst.
Osborne added, "Tesla Motors has a substantial lead on its competitors, effectively blazing the trail by offering an aesthetically pleasing and high performance all-electric vehicle, foregoing the traditional "green conscious" target market. TSLA is one of the most well publicized stocks today. Within our ~100 page initiation, we would point investors to our work on battery chemistry as well as the emerging opportunity for stationary storage. We see risk to the story in the near term given pending launch of the Model 3 and Gigafactory - both imperative to reaching sustained profitability. New initiatives in the trucking and bus markets seem like a stretch to us given lower volumes, longer sales cycles and heavy R&D needs. Integration of SolarCity (SCTY, $18.06, Market Perform) likely will take some time and soak up badly needed cash."
Shares of Tesla Motors closed at $201.71 yesterday.
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Related EntitiesCowen & Co, Tesla, Definitive Agreement, Model 3
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