Recent Tesla (TSLA) Headlines Increase the Focus on the Balance Sheet Says Citi
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Citi analyst Itay Michaeli maintains Neutral on Tesla Motors (NASDAQ: TSLA) price target of $356.00.
Michaeli believes legal-related risks to Tesla are real following the recent spate of tweets from CEO Elon Musk, primarily the "Funding Secured" tweet regarding taking the company private.
He notes that should management or the business appear under pressure, then future company targets are called into question, which then impacts a potential go-private transaction which then increases legal-related risks which then brings into question the balance and so on.
The analyst comments "As noted, some of the headline interpretations can be debated, but we do believe that legal-related risks (class-action suits) are real and could indeed place more pressure on Tesla’s cash position (particularly if a go-private transaction doesn’t materialize), and not just under a worst case outcome from the reported SEC inquires. Ultimately, credit risk is a function of confidence, without which a company’s financial position can quickly spiral into distress. Though we don’t think Tesla has necessarily entered such a spiral, the current state of affairs heightens the focus."
The analyst has a preference for the risk/reward positioning within AV networks through GM-Cruise.
Shares of Tesla Motors closed at $305.50 yesterday.
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