Tesla Motors Inc (NASDAQ:TSLA) is approaching the release of it’s next all-electric SUV, the Tesla Model X. The new car is the firm’s big chance at boosting its market share and showing Wall Street that it is worth the $30 billion it’s currently valued at. Standard & Poor’s today revised its outlook on the firm, and it said that the Model X had been saved by a new deal between Elon Musk and some major banks.
Last Friday Mr. Musk revealed that he had secured a $500 million credit facility for Tesla Motors from Deutsche Bank, Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo and Credit Suisse. That credit facility is a “liquidity cushion” says Nishit Madlani who authored the new report on Tesla Motors.
Tesla Motors saves the Model X
Standard & Poors reaffirmed a B- on Tesla Motors debt. That means that the firm has the ability to meet its obligations, but poor business performance is a risk to the firm’s payments. Tesla has about $920 million in debt in the form of convertible bonds.
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Standard & Poor’s says that “Tesla will continue to improve its gross margins and that the company’s global vehicle deliveries will increase significantly, year-over-year, in 2015,” but it saved it most important comments for the Model X and the effect of the credit facility on that project.
Mr. Madlani says that the $500 million credit line is a “liquidity cushion” that will “offer better protection against any potential execution missteps or inefficiencies” as the firm sets itself up for the launch of the Model X SUV.
The analyst warned that he might downgrade the firm if things on the Model X line go worse than forecast. Mr. Madlani says thati if “significant execution issues or cost overruns related to the company’s launch of its Model X later this year materialze” his outlook on Tesla Motors will change.
Tesla Motors edges toward the Model X
Tesla Motors Inc CEO Elon Musk told the world last week that he expects the Model X to ship in the next three or four months. The firm has guided for a launch of the EV SUV some time in the third quarter of 2015, though most of Wall Street is looking for very few units of the Model X to arrive before the end of September.
Adam Jonas of Morgan Stanley thinks that the firm will be able to get just 50 units of the car to garages in the US before the end of the third quarter.
Tesla Motors is well on the way to getting the Model X out there for reviews. If the response to the Model S in 2013 is any guide, the firm’s next car will be lauded by any who get a chance to sit in it. With the $500 million “cushion” supporting it, there are fewer worries about the firm’s ability to handle its cash situation.
Tesla Motors showed about $1.5 billion of cash at the end of the first quarter. With the second quarter coming to a close it’s likely that the firm has drawn that down significantly.
there are 23 analysts following Tesla Motors on Wall Street, and 5 of them tell their clients to Buy shares in the company, 8 expect Elon Musk’s Model X maker to Outperform while just 4 analysts think it will Underperform. The remaining six analysts say to Hold the shares.
The 17 analysts that have price targets on the firm have an average 12 month target of $290, more than 16% above this morning’s opening price. The Wall Street high of $400 is set by James Albertine of Stifel. He sees 4,500 Model X SUVs being shipped before the end of the year.