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Elon Musk tempts Tesla shorts after Goldman Sachs’ negative report

Tesla stocks (NASDAQ:TSLA) remain resilient on Wednesday despite Goldman Sachs’ downbeat report on the company’s capability to deliver its most ambitious vehicle to date — the Model 3.

The Wall Street firm recently reiterated its Sell rating on TSLA, cutting the 12-month price target for the electric car maker from $205 to $195 and implying a 32% downside to the stock. According to analyst David Tamberrino in a note on Tuesday, Goldman Sachs suspects that the sustainable Model 3 production rate for Q2 2018 would be far lower than Tesla’s optimistic estimates. In his note, the analyst stated that Tesla would likely sustain a production rate of about 1,400 Model 3 per week.

“We believe the sustainable production rate for the second quarter of 2018 is most likely below the 2,000 vehicle mark the company achieved in the final week of the [first] quarter. We see the company likely sustaining Model 3 production around the 1,400 per week mark,” Tamberrino wrote.

After hitting a 52-week low, Tesla’s stocks have managed to pull off a meteoric rise that included a three-day blitz which recovered $9 billion of its market cap. Since the release of its first-quarter delivery and production report, TSLA shares have been up nearly 20%. Tesla also stated that it does not need a capital raise this year, and that it would just maintain standard credit lines. The Goldman Sachs analyst disagrees with this, however, stating that Tesla would likely be forced to raise its capital later this year.

“Although the company stated that is does not require a capital raise this year, we note that this is predicated upon a sustained 5,000 per week production rate achieved exiting the second quarter of 2018. Beyond a required capital raise to continue to fund the launch of the Model 3 program, the company would likely still need outside capital in the future for capacity and product expansion,” Tamberrino wrote.

Goldman Sachs’ expectations for Tesla were addressed by one of Elon Musk’s followers on Twitter, who stated that being a TSLA shareholder, such news doesn’t make him “warm and fuzzy.” Responding to the investor, Musk promptly tweeted back.

Despite doubts from analysts such as Goldman Sachs’s Tamberrino, Tesla’s stocks have been proving their resiliency over the past few weeks. After hitting 12-month lows, the company’s shares experienced their best week in four years, ending the week with gains of 14.5%. Bloomberg’s Model 3 tracker, which is designed to predict how many of the mass market electric cars are being manufactured every week, also exhibited a rise in production. As of this week, Bloomberg’s tracker estimates that Tesla is producing roughly 2,400 Model 3 in a week.

As of writing, TSLA is trading up .59% at $306.51 per share.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Elon Musk tempts Tesla shorts after Goldman Sachs’ negative report
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