Cars

Tesla Model 3: Influential Comments Puts A Halt To Financial Streak

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Tesla’s shares have experienced a boom in valuation after the carmaker started taking in deposits for the upcoming Model 3. Ever since then, Tesla has been recording rapid rise in market valuation and investors were quick to put their money on the EV manufacturer.

Everything was going well for Tesla until today, when an influential investment firm makes an opposing comment towards the carmaker. Adam Jonas from Morgan Stanley downgraded Tesla’s stocks when he mentioned the following:

“Following 1Q results, we have updated our model and now have a higher estimate of OP loss in 2017 and 2018. Following these adjustments (mainly higher R&D, SG&A and the impact of higher capex), we now expect Tesla to remain loss-making on a US GAAP basis until late 2019. Our estimate of cash burn for 2017 widens to $3.1 billion from $2.3 billion previously, taking our forecast of gross cash to under $1 billion by the end of 2018. By itself, these changes to our model would have taken our price target to $292. Rolling forward the starting point of our DCF of the core business to May 1st (from Jan 1st) was an equal offset. Our price target thus remains unchanged at $305, or roughly 6% downside from the current stock price.”
It basically means that the investment market is now losing confidence on the Tesla Model 3. This is because the car is unlikely to arrive in 2017 and its prospects have been reduced due to upcoming rivals promising greater things.