Tesla (TSLA) Stock to Suffer Amid 2019 Tax Credit Cut, Says Goldman Sachs

Tesla (TSLA) took investors out on a roller-coaster test drive in 2018. The company’s stock has risen or fallen by double digits more than a dozen times this year, as rumors, gossip and earnings reports sent investors either fleeing from or crawling to the stock. Its celebrity CEO Elon Musk was forced to step down as Chairman following an SEC investigation, but Tesla also reported its strongest-ever quarterly reports which has propelled the stock 40% since October. But Goldman Sachs analyst David Tamberrino thinks the stock will run out of gas and reiterates his Sell rating and $225 price target. (To watch Tamberrino’s track record, click here)

With the $7,500 US Federal Tax Credit for electric cars being cut in half at the beginning of the new year, Tamberrino believes demand for Tesla vehicles is being accelerated in 2018 before an expected drop in 2019. Tamberrino says the “pull-ahead of deliveries and option mix” occurring in the second half of 2018 will “likely create a lull in demand starting in 1Q19 that may not be fully made up by… [demand in Europe and China].”

While investors are happy that Tesla hit its Model 3 production goal of 5,000 per week over the summer, Tamberrino says that average selling prices of the car will be closer to its base price. He says, “we believe the bulk of sustainable demand for the Model 3 likely resides at the lower end of the price curve (i.e., for the not-currently-offered base price $35k variant), we believe program margins will likely mix-down as time progresses.”

In addition to expected lower demand in 2019 and Model 3 cars selling near the low-end of its price curve, Tamberrino is concerned about rising competition against Tesla. He specifically points to the Model S and Model X, as luxury automakers are increasingly offering premium luxury vehicles that sell in the range of and will compete directly with the S and X.

Bulls and bears are torn on Tesla. TipRanks analytics demonstrate the electric car giant’s stock as a Hold, but 10 analysts rate the company a Buy, 8 say Hold, while 9 recommend Sell. Of the 27 analysts, the average price target is $337.21, or only 18 cents higher than its current value. (See Tesla’s price targets and analyst ratings on TipRanks)


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