Tesla Inc (NASDAQ:TSLA) stock tumbled following the company’s third-quarter earnings report, and now investors are faced again with a major question. Just how much do they believe in Tesla and its management? Several analysts slashed their price targets following the Tesla Inc (TSLA) 3Q 2017 earnings release, and Tesla Inc (TSLA) stock slumped to its lowest level in months.
Tesla stock slips back under $300 per share
Goldman Sachs, JPMorgan and at least two other firms slashed their price targets for Tesla Inc (TSLA) stock following Wednesday night’s release. Goldman had one of the most bearish targets, and it continues to after cutting its target from $210 to $205. The firm’s analysts also reiterated their Sell rating on Tesla Inc (TSLA) stock as they expect the shares to continue sinking and noted that CEO Elon Musk said they will have to raise additional capital in the second quarter of 2018.
That announcement only served to make the bears even more bearish because there seems to be no end to the cash burn. Deutsche Bank analyst Rod Lache said in his note about Tesla Inc (TSLA) 3Q 2017 earnings that cash burn is now back in focus. He slashed his price target for Tesla Inc (TSLA) stock from $320 to $310 and reiterated his Hold rating.
He wasn’t surprised by the reduced guidance although he noted that it again highlights the execution risks the company faces and how much it “depends on a deep reservoir of trust (and capital” from investors.” On the plus side though, he sees “scenarios” in which the automaker can get past temporary challenges, although he adds that because of the cash burn and the possibility of further delays, “the margin for error is once again becoming uncomfortably thin.”
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Not everyone slashed their target for Tesla Inc (TSLA) stock
Baird analyst Ben Kallo is still a believer in the company, so he reiterated his Outperform rating and $411 price target for Tesla Inc (TSLA) stock following the results, and he’s not the only one to hold steady. He doesn’t believe the company needs the extra capital to ramp Model 3 production as it has over $3.5 billion in cash on hand. However, he also warned that Tesla Inc (TSLA)stock will likely remain pressured for now because the company is two or three months behind schedule for the Model 3.
He noted that the automaker beat expectations on the top line with $2.985 billion in sales but missed on the bottom line because of its gross margin. Non-GAAP losses per share were $2.92, versus the consensus of $2.31 per share in losses. The total gross margin came in at 15% versus the 17.9% consensus. Kallo also warned that Tesla Inc (TSLA)’s gross margin will decline sequentially again in the fourth quarter because of the Model 3 ramp, but that should be temporary. He expects margins to expand next year.
Nomura Instinet analyst Romit Shah is even more bullish on Tesla Inc (TSLA) stock than Kallo as he reiterated his $500 price target and Buy rating even after the wider-than-expected losses and the delayed production ramp. Tesla Inc (TSLA) shifted back the timeline for building 5,000 vehicles per week by about three months to “by the end of the first quarter,” and Shah believes that the shift “right sizes production guidance closer to what the Street was forecasting heading into the print.” He also feels that investors would view this timeline more positively if Tesla Inc (TSLA) achieves it.
Tesla Inc (TSLA) stock was down by as much as 7.66% at $296.47 during regular trading hours on Thursday.