Tesla Inc. (NASDAQ: TSLA)
Shares of Tesla were down $12.27, or 4.10% to change hands at $286.65 apiece as of 1:25 p.m. after RBC Capital downgraded the electric car maker. In a statement released early Wednesday, RBC Capital said the electric car maker has begun giving some straight talk to market participants about its future growth, though many investors aren’t still digesting the details.
RBC Capital downgraded the Palo Alto, CA-based company to underperform, adding that its growth prospect was too lofty based on its current performance. Joseph Spak, analyst at RBC Capital wrote, “It’s not that we don’t believe Tesla can grow over time, our model shows solid LT growth. But the current valuation already considers overly lofty expectations.”
Spak went on to say that Tesla “seems to be more tactful with messaging which is a long-term positive, but means downward pressure to growth expectations – which in our view are too high to justify current levels, let alone to add to positions. For years, Tesla sold the dream of transportation disruption and fantastic growth. This served the stock well turning Tesla into a top 6 (at times top 3) valuable auto OEM despite delivering a fraction of units of others and nary a profit.”
The analyst said the reality of Tesla becoming a high-volume manufacturer is beginning to wane, as the company struggles to hit production targets. “A stock should of course discount future cash flows and the market took the promises of Tesla and their future growth potential to justify lofty valuations while Tesla took capital needed to support their endeavors. But the rubber appears to be hitting the road as the realities of Tesla becoming a volume player, the challenges to scale and deliver high volume at high ASPs/margins are coming to a head,” Spak wrote.
Tesla Inc. Profile
Tesla, Inc. engages in the design, development, manufacture, and sale of fully electric vehicles, energy generation and storage systems. It also provides vehicle service centers, supercharger station, and self-driving capability. The firm operates through Automotive, and Energy Generation and Storage segments. The Automotive segment includes the design, development, manufacture and sale of electric vehicles.
The Energy Generation and Storage segment includes the design, manufacture, installation, sale, and lease of stationary energy storage products and solar energy systems, and sale of electricity generated by its solar energy systems to customers. The company was founded by Jeffrey B. Straubel, Elon Reeve Musk, Martin Eberhard, and Marc Tarpenning on July 1, 2003 and is headquartered in Palo Alto, CA. – CNN Money