Shares of Tesla Motors Inc have tumbled over 16% during the last three months. The stock is down nearly 12% over the last 30 days. The electric car maker is going to need more capital to complete construction of its $5 billion Gigafactory, ramp up the Model 3 production and fund the acquisition of solar panel installer SolarCity.
Recently, the company’s CEO Elon Musk announced the second part of his Master Plan. Titled Master Plan, Part Deux, the plan includes solar roofs with seamlessly integrated battery storage, pickup trucks, heavy-duty truck, and a bus. On the Wall Street, analysts have mixed views about the company’s prospects. Many analysts are concerned about how Tesla will secure money to fund its new programs.
Cowen Cuts Tesla Price Target, 20% Downside Ahead
According to CNBC, analysts at Cowen and Co. initiated coverage on the Tesla’s stock with an underperform rating. The firm’s main concern is additional capital that Tesla will need to raise next year.
Year-to-date, Tesla Motors Inc shares are down 17.11%. The stock currently trades at around $197. According to CNBC report, the $160 price target means Cowen sees another 20% downside ahead.
Analyst Jeffrey Osborne, who joined the “Halftime Report” to discuss his call, said that Musk is trying to do so many things rather than focusing on the Model 3 and the Gigafactory, both are imperative to long-term profitability.
In a research note, Cowen said that “the company, while fundamentally well positioned for the long term, has a material amount of execution risk over the next 12 to 18 months.” The firm noted that the SolarCity acquisition “only adds an additional layer of complexity.”
The automaker spent $117.4 million on the Gigafactory in the first half, and plans to spend a total of about $520 million this year on the construction of the factory. The company warned in its previous quarterly filing that the cost of building and operating its Gigafactory could exceed the current expectations.
Additionally, Tesla’s planned $2.6-billion acquisition of SolarCity will add to its liquidity issues. Combined, the two firms’ debt totaled $5.43 billion with a combined cash burn of $830 million last year.
Dave Whiston, analyst at Morningstar, believes that the automaker should think about a single, big equity offering that would give the company the cash to fund its ambitious growth plan and protect itself from rough times.
In August, Tesla said that it had $3.25 billion in principal sources of liquidity as of June 30, including $1.7 billion from a public offering in May and a $678 million credit line. The company also disclosed in a filing with the U.S. Securities and Exchange Commission that it will spend about $1.1 billion in the third quarter on payments and other planned expenditures.
Musk Makes Targets That Are Never, Ever Achieved
Erin Gibbs, equity chief investment officer at S&P Global, views Tesla Motors Inc “as a complete sell for multiple reasons.”
Talking in CNBC’s “Trading Nation,” Gibbs said that “Elon Musk loves to make these wonderful targets that are never, ever achieved,” Gibbs said. “I’m surprised that investors aren’t a little more frustrated.”
Gibbs said that Tesla’s proposed SolarCity acquisition is a “distraction,” and a “drain on the cash flow, which they really need as a company that’s supposed to be growing 50 to 60 percent per year.”