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Tesla (TSLA) and the Great Wall; Goldman Sachs Weighs In

Goldman Sachs' David Tamberrino may be bearish on Tesla, but he sees a prospective medium-term advantage ahead in China.


Goldman Sachs analyst David Tamberrino may be bearish on Tesla (NASDAQ:TSLA), but could a “potential positive” have him singing a different tune? With China primed to lessen the regulation reigns on foreign ownership or automakers of new energy vehicles, the analyst sees this as good news for an electric car giant that has been looking to a) avoid tariffs over in China b) secure 100% ownership and c) gain advantage from the region’s NEV program. Though Tamberinno pinpoints “mixed implications” for the rest of the OEMs in his coverage, he wagers Tesla stands to gain “the most potential benefit in the medium-term.”

That said, despite the new plan from China’s National Development and Reform Commission (NDRC) revealed this week, the analyst reiterates a Sell rating on TSLA stock with a $195 price target, which implies a 34% downside potential from current levels. (To watch Tamberrino’s track record, click here)

Tamberrino notes, “We see Tesla as the largest potential beneficiary in our coverage due to (1) the accelerated treatment of BEV and PHEV under the potential rule change (roll-back in 2018, versus 2022 for other passenger vehicles), and (2) China being the company’s second-largest market, while currently having no local production capacity. Tesla has previously targeted building out China production capacity by 2020 […] but, per Bloomberg (2/13/2018), the company was unable to negotiate favorably with the Chinese government.”

Coupled with the analyst’s current capital requirement expectations, he wagers the prospective China manufacturing capacity may need another roughly $4 to $5 billion in capital investment from the giant. Tamberinno anticipates around $1 billion in capital in the back half of the year will need to be raised in order to fuel present-day operations.

Ultimately, the final note remains a negative one for the bear: “Of course, we note that the announced rule change does not immediately reduce import tariffs for Tesla, leaving it at a relative disadvantage to local competition – where a few smaller EV start-ups are launching products in the next two years.”

TipRanks indicates apprehension weighs heavy on the electric auto empire’s stock. Out of 20 analysts polled in the last 3 months, 5 are bullish on TSLA stock, 9 remain sidelined, while 6 are bearish on the stock. The 12-month average price target stands at $294.07, aligning evenly with where the stock is currently trading.