Goldman Sachs Downgrades Tesla Motors (TSLA) to Sell

Goldman Sachs downgraded Tesla Motors (NASDAQ: TSLA) from Neutral to Sell with a price target of $185.00 (from $190.00).

Analyst David Tamberrino comments "While we believe Tesla currently has a lead relative to OEM peers with respect to vehicle technology adoption, electric vehicle architecture, and (potentially) battery scale, our concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs. Ultimately we see a delayed launch (pushing volume growth out and to the right) and FCF burn rate (necessitating a capital raise before 4Q17) to weigh on TSLA’s shares."

Tamberrino further states that "operational execution still unproven" citing likely disappointment coming from Model 3 production launch and the unproven SolarCity business model likely dampening Tesla's focus and results.

Specifically addressing SolarCity Tamberrino comments "We believe the recent acquisition of SolarCity increased the risk profile of Tesla amidst a business model transition – from company-owned equipment installation and lease/PPA contracts to customer purchased equipment on cash/loan sales – and provides limited synergies. Ultimately, the acquisition raised the net leverage of Tesla while creating EBITDA and FCF drag that requires incremental non-recourse debt to be raised. Lastly, we see 2017 as a pivotal year for Tesla as it looks to become a mass automobile manufacturer, and with the integration of SolarCity also occurring the company may lack the singular focus it should have on achieving its Model 3 launch targets."

Lastly, Tamberrino shares what he is calling "The Tesla Hype-Cycle" which is self-explanatory:

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 $257.00 Friday.

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