Colin Langan – an analyst at UBS released a research note today, reiterating his Sell rating on Tesla Motors Inc (NASDAQ:TSLA) stock along with a $140 price objective. The analyst mentioned in his report that the 60% hike in the automaker’s stock price is merely artificial as it is not backed by the fundamentals. Moreover, the analyst’s bearish stance comes two days before the launch of Tesla’s all important Model 3 vehicle designed for the mass market.
Mr. Langan believes that the recent surge in the Palo-Alto, California based upscale electric car maker’s stock price is majorly due to the announcement by Tesla regarding the ABL (Asset-backed-liability) draw down. Through drawing down the remaining of the $1 billion ABL, the car maker has waived-off the near term liquidity concerns which led to a rise in Tesla’s stock price. In addition to this, the analyst believes that the excitement and anticipation before the Model 3 unveiling along with a recovery in the prices of gasoline has bolstered the investors’ sentiments and the investors’ stance has turned bullish.
In his report, the analyst elaborated that: “However, we believe the market should not ignore fundamental headwinds that persist with regards to TSLA’s storage business, long-term profitability of the Model 3, and eventual need to raise cash.”
Furthermore, Mr. Langan views the unveiling ceremony of Tesla’s first all-electric vehicle for mass market – Model 3, as a potential negative catalyst. He believes that the event is highly anticipated and the electric vehicle maker is planning to launch the car when new competitors have also entered in the market. Additionally, the analyst fears that if Model 3 turns out to be such a sensation at a lower cost, it could cannibalize the demand of already running Model S and Model X. Tesla’s Model S and Model X are designed for high-end customers and are much more expensive than Model 3’s announced priced.
The analyst at the sell-side firm also mentioned in his report that according to the $155/kWh pack costs, Model 3 costs seems to be over-priced by roughly $7,000 as compared to an equivalent ICE vehicle.
23 investment firms at Wall Street provide coverage on Tesla stock. Out of these 23 firms, 11 firms tend to be bullish on the stance and advocate the investors to buy the stock. Analysts at another six firms believe that the stock is a Hold while the remaining six analysts believe that the investors should sell the stock. The 12-month consensus target price on the stock is $245.59, with a return potential of 8.5%.