How Financially Stable Is Tesla?
Tesla Motors Inc (NASDAQ: TSLA) shares are having a green Monday after an upgrade from Argus analyst Bill Selesky to Buy. Amid the analyst's growth and revenue outlook, he also gave an interesting look into Tesla's financial stability.
"We rate TSLA's financial strength as Medium, the middle rank on our five-point scale. The company's debt is rated B/stable by Standard & Poor's. The debt is not rated by the other ratings agencies," Selesky wrote.
Tesla's debt totaled $2.68 billion at the end of last year, up from $2.49 billion at the end of 2014 amid investment in new production operations. While the company's debt-to-capital ratio is above the auto industry average, it did fall in 2015 from 73.2 percent to 71.4 percent.
An improvement in cash flow from operations -- to -$29.8 million from -$86.4 million by 2014 year end -- is also reflective of a "decrease in finished goods inventory related to cars in transit and greater manufacturing efficiencies."
Tesla is unlikely to institute a dividend any time soon, Selesky predicted.
Other Risk Factors
He also discussed future risks Tesla may face. "Like its competitors, Tesla faces risks from weak global economic conditions and changes in consumer preferences and spending patterns," he wrote, adding that the company is at risk of higher raw materials and components costs.
"In addition, the company is a new player in an established, high-volume industry, and is heavily dependent on the leadership of founder and CEO Elon Musk," he concluded.
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