The stock value of Tesla Motors Inc (NASDAQ:TSLA) plummeted by more than 13 percent to around $110 per share on Tuesday afternoon trading in New York. The decline was caused by a bearish report released by an analyst at Goldman Sachs Group, Inc (NYSE:GS).
In a note to investors, Goldman Sachs auto analyst Patrick Archambault initiated a price target of $84 for the shares of Tesla Motors Inc (NASDAQ:TSLA) on an average scenario. In a worst- case scenario, his price target for the stock was $58 and $113 in the best-case scenario.
Tesla at risk of "sustainability of demand longer term"
The analyst indicated in his report that one of the risks confronting Tesla Motors Inc (NASDAQ:TSLA) is the “sustainability of demand longer-term.” Archambault also said that his research showed that the company could sell approximately 105,000 cars with 14.5 percent operating margin if the sentiment of consumers about its cars becomes weaker this year. On the other hand, he estimated that Tesla might be able to sell 200,000 vehicles if consumer sentiment becomes bullish. Its market share in luxury auto sales will be around 3.5 percent.
Furthermore, the analyst noted that auto stocks generally declines when rates increase. According to him, “This has occurred even in the face of rising demand.”
Last month, United States Federal Reserve Chairman, Ben Bernanke stated that the central bank will start easing its bond-buying initiatives once the unemployment rate in the country improves. Such a move will lead to an increase in interest rates. The auto industry was not yet affected by the announcement of Bernanke, as car manufacturers reported good sales performances in June.
Meanwhile, Elon Musk, CEO of Tesla Motors Inc (NASDAQ:TSLA) stated that the company will be able to sell 800 cars per week by the end of 2014 during the TESLIVE, the first-ever users conference of Tesla car owners and fans yesterday.
Tesla tries to avoid "big-company-it-is"
During the event, Musk also said that the biggest challenge confronting the company is scaling production and avoiding "big-company-itis.” The lithium-ion cell production, which is a primary component of Tesla battery packs, is also an obstacle for the company.
According to Musk, Tesla Motors Inc (NASDAQ:TSLA) is working closely with Panasonic to increase the lithium-ion cell production. He said, "We're working with Panasonic to ramp up production. We need a lot of battery. The sheer number of battery plants that needs to get built is quite staggering."
Musk also said the company is focused on expanding the network of supercharges as well as selling its vehicles in Europe.