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Canaccord Cuts Price Target on Tesla (TSLA) as Upcoming Debt Obligations Are Cause for Concern


With Friday’s blog posts from Tesla’s (NASDAQ:TSLA) board and CEO Elon Musk, the electric car giant is scrapping plans to go private. At least as of right now, Tesla’s conclusion is that going private would be too much of a hassle for the company, and a burden on its shareholders.

Canaccord analyst Jonathan Dorsheimer believes the drama associated with this endeavor, which includes tweeting “funding secured,” is a great example of why even a great company may need different leaders during its life cycle.

The analyst remains sidelined on TSLA shares, reiterating a Hold rating, while cutting the price target to $316 (from $336), which represents a slight upside potential from current levels. (To watch Dorsheimer’s track record, click here)

Dorsheimer commented, “Less than three weeks after announcing he was considering taking Tesla private, Elon Musk announced that he has decided against going through with the transaction. What was at best a premature announcement has generated three weeks of distraction from one of Tesla’s most important quarters to date. As the dust has settled, the result has been a nominal change in stock price, along with an SEC investigation and multiple class-action lawsuits. We feel less confident in the company’s ability to meet it’s 50,000 to 55,000 production guidance indicated at the end of Q2.”

“With higher performance models and cash buyer Model 3s being prioritized, Tesla will be able to stave off cash concerns in the short-term. However, its upcoming debt obligations are cause for concern. With a $230M tranche due in November 2018 at $560/share and $920M due in March 2019 at $360/share, Tesla will need to secure profitability by the end of the year to maintain solvency,” the analyst added.

Wall Street believes Dorsheimer is smart to play it safe when it comes to the company’s prospects ahead, as TipRanks analytics reveal TSLA as a Hold. Out of 27 analysts polled in the last 3 months, 8 are bullish on Tesla stock, 10 remain sidelined, while 9 are bearish on the stock. With a slight upside potential, the stock’s consensus target price stands at $322.05. See TSLA’s price targets and analyst ratings on TipRanks.