Tesla (TSLA) was on a rally over the past few days, but it has now reversed after Goldman Sachs came out with a new note telling its clients that they question long term demand for Tesla vehicles.
Goldman Sachs’ auto analyst David Tamberrino wrote:
“We believe that is the largest question for investors to underwrite at this point — what are sustainable demand levels for the Model S, Model X, and Model 3 — and how does that change with the introduction of Model Y production. We believe a downward path for shares will resume as it becomes more clear that sustainable demand for the company’s current products are below expectations.”
The analyst justified his position by claiming that Tesla has fewer “demand levers” to pull going forward due to the introduction of the leasing program for Model 3 and the end of the federal tax credit, amongst other things.
“While there are a couple known potential positive catalysts to the story and shares later this year, we believe the potential pull-forward of the Model Y production launch would carry the most impact given the potential size of the market and margin profile for the vehicle.”
The analyst doesn’t see Tesla becoming a ‘1 million vehicles per year’ automaker.
For those reasons, Goldman Sachs changed its price target on Tesla (TSLA) from $200 to $158 per share.
Tesla’s stock was down by as much as 3% this morning following the note.
David Tamberrino is ranked #3,392 out of 5,208 Analysts on TipRanks with a success rate of 64% and an average return of 0.1%. He has been maintaining a sell rating on Tesla’s stock over the last year:
Why anyone would listen to someone with such a bad track record is beyond me.
All indications I have so far is that the demand for Model 3 is extremely strong. Model S and Model X are a little weaker, but I expect that a refresh coming later this year is going to boost sales significantly.
I think that all the bears who are banking on demand issues and competition affecting Tesla are making a big mistake.
Improvements in battery and Autopilot technology are going to be massive demand levers for Tesla’s existing lineup in the next year and new models coming to market, like Model Y, are going to easily push the demand for Tesla vehicles to over 1 million units per year.
Whether Tesla will be production ready in time to respond to it is another thing. But mark my words: demand will not be an issue.
Disclosure: I am long TSLA.
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