Goldman Sachs Downgrades Tesla To Sell, Sees 28% Downside

Tesla Inc (NASDAQ: TSLA) is currently ahead of its OEM peers in terms of “vehicle technology adoption, electric vehicle architecture, and (potentially) battery scale,” Goldman Sachs analyst David Tamberrino said in a report. He added, however, the company’s shares could come under pressure due to a delay in the Model 3 launch and high FCF [free cash flows] burn rate.

Tamberrino downgraded the rating on Tesla from Neutral to Sell, while reducing the six-month price target from $190 to $185. He stated the revised price target represented 28 percent downside, versus 8 percent downside for peers.

Near-Term Concerns

Some suppliers had expressed concern that the final designs of Model 3 had not been locked down, Tamberrino mentioned. A delayed launch could severely impact volume and the FCF burn rate would necessitate a capital raise before Q4 2017.

Related Link: Tesla Beats Q4 Sales Estimates, Global Orders Up 49%

“We expect to see pressure on shares as we progress through the year, as cash burn intensifies and the ramp of Model 3 volumes proves to be slower and flatter than assumed in guidance/consensus,” the analyst commented.

Referring to the acquisition of SolarCity Corp (NASDAQ: SCTY), Tamberrino commented that the business model was unproven and was undergoing a transition, and that Tesla should have been “singularly focused on becoming a mass automobile manufacturer.”

Tesla's stock was trading down by more than 2.5 percent at $250.25 in Monday's pre-market session.