Goldman: Now Is Not The Time To Buy Tesla

• Tesla Motors Inc TSLA reported mixed Q3 earnings numbers.
• Goldman Sachs likes the positive commentary from the company concerning both the Model S and Model X.
• The firm sees a great deal of uncertainty remaining and believes that patient investors should wait for a lower entry point.

In a new report, Goldman Sachs analyst Patrick Archambault explains why Tesla’s Q3 earnings report wasn’t as bad as some had feared. However, the company’s recent numbers don’t make the stock a buy just yet.

Estimate changes
Tesla’s reported Q3 revenue of 1.24 billion came in slightly above Goldman’s estimate of $1.2 billion. However, Tesla’s EPS fo -$0.58 came in just shy of Goldman’s -$0.55 projection. Archambault blames this miss on higher-than-expected opex.

Following the Q3 report, Goldman has slightly reduced its gross margin outlook for the company and expects that Tesla will report on the low end of its 50k-52k delivery guidance.

Goldman has reduced its 2016/2016/2017EPS projections from -$0.64/$2.55/$3.89 to -$1.52/$2.27/$3.46.

Outlook
Despite another shipment guidance reduction, Archambault points out that the tone of Tesla’s Model X discussion seemed much more confident than in past quarters. In the near-term, however, Tesla still faces challenges in optimizing the production process and obtaining an adequate supply of second-row seats.

Model S commentary was also positive, including a 50 percent year-over-year global order increase in Q3 driven in part by China demand. Archambault notes that Goldman remains concerned about the type of market impact that recently-raised reliability issues will have.

When to buy
For now, Archambault advises that Tesla buyers be patient and wait for a better opportunity. “We would continue to use the natural volatility in the shares to seek a better entry point,” he explains.

Goldman maintains its Neutral rating on Tesla but reduced its price target from $234 to $230.

Disclosure: the author holds no position in the stocks mentioned.