TSLA shares rose today following a somewhat bearish analyst initiation. The EV maker’s stock will probably rise and fall based on what’s happening with the Model 3 for some time to come, so it probably matters very little what analysts say about it these days. This time, the big concern is Tesla’s balance sheet, something other bears have also taken issue with.
However, investors have shown plenty of interest in paying for other “investing for growth” stories, with Amazon being the prime example of that. In Tesla’s case, the growth is coming in the Model 3, and new photos of the backseat of one of the first cars to be produced have appeared online.
According to MarketWatch and CNBC, Citi analysts initiated coverage of TSLA shares at Neutral/ High Risk, warning that by the end of this year, the automaker’s cash balance will plunge to $1.1 billion. That’s a significant drop from the first quarter when the company’s cash balance stood at $4 billion, and expenses from setting up production for the Model 3 quickly started to eat into that balance. The EV maker is cash flow negative.
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Citi analysts said in order to become more bullish on TSLA shares, the company will have to beef up its balance sheet. They added that the company will need fresh capital amounting to billions of dollars, despite CEO Elon Musk’s assurances that they don’t plan to raise more capital. Further, they said if the company can’t access the capital markets, the strain on its financial strain will be “substantial.”
Tesla is a leader in the “Car of the Future”
Interestingly, Citi analyst Itay Michaeli reportedly wrote that he’s “positive on Tesla’s position as a Car of the Future leader,” and he believes that there could be “significant” upside to TSLA shares if the company is successful. However, he feels it would be a good idea to wait for a better entry point for TSLA shares, which would include an improved balance sheet.
If the company manages to improve its balance sheet, he feels the 12-month risk/ reward proposition on TSLA shares would be more favorable. However, he doesn’t expect the company to turn cash free cash flow positive until 2019, and he believes it will have to raise $5 billion in capital next year in order to have enough of a cash buffer.
Interestingly, he set his price target at $357 a share, which is meaningfully below where TSLA shares are trading now. The stock closed up 1.43% at $329.92 on Thursday.
New interior photos of the Model 3
With the Model 3 being such a major focus of investors when it comes to TSLA shares, it’s no surprise that they climbed today despite the bearish analyst note, or perhaps partially driven by it. After all, a $357 price target, paired with the latest photos of the Model 3 interior could be enough to make any Tesla fanboy’s heart flutter.
The EV maker has planned a handover party for the Model 3 next week, and as the hype around the car rises, so have the sightings of the Model 3. Musk showed off the first production Model 3 earlier this month, but there weren’t any good shots of the interior. However, an Electrek reader shared some images of a Model 3 at the company’s California Design Studio, and it’s believed to be one of the production units. One of the pictures was of the backseat, and it’s a rare photo. It shows a pair of USB ports so the kids in the backseat can keep their devices charged on road trips. It doesn’t look like there’s much legroom in the backseat, but the Model 3 is smaller than the Model S, so that shouldn’t be a surprise.