Tesla – the largest electric car making giant in the world – will continue to have problems in producing its Model 3 cars, according to UBS, which reaffirmed its sell rating for the shares of the automaker. The analyst of UBS wrote that they believe the market should not ignore the automaker’s ultimate requirement to raise cash.
Market cannot ignore fundamental challenges of Tesla: UBS analyst
The analyst of the firm writes, “We believe the market should not ignore fundamental challenges that persist with regards to Tesla’s Model 3 profitability, stationary storage & solar businesses, and eventual need to raise cash.” According to one Wall Street firm, the disappointing production increase of the automaker’s midstream electric car – Model 3 – is a troubling sign.
UBS predicts that the U.S.-based electric car maker will continue to have problems in producing its Model 3 vehicles, which is why it reaffirmed its sell rating on the shares of the electric car making company.
In comparison to the estimates of 25,860 total vehicles and 1,260 Model 3 cars of FactSet, the electric car making giant delivered 26,150 total vehicles and only 220 Model 3 electric cars in the third quarter. In addition to this, the electric car maker had said two months before it revealed the number that it would produce over 1,500 Model 3 vehicles for the third quarter.
On Monday, in a note to clients, analyst Colin Langan, wrote “Not only does the [Model 3] miss undermine the credibility of future Model 3 targets, but it increases the near term risks.” The analyst further wrote, “We believe the market should not ignore fundamental challenges that persist with regards to Tesla’s Model 3 profitability, stationary storage & solar businesses, and eventual need to raise cash.”
Tesla will need additional funding, here’s why
The stock of the automaker traded down a little on the Monday morning. In comparison to the 15% profit of the S&P 500 through Friday, the shares of the electric carmaker are up 50% this year. As per the reports of news site CNBC, the analyst dropped his profit estimates for the EV making giant because of the slower production of the EV Model 3.
The analyst Langan reiterated his $185 12-month price target for the shares of the automaker. This represents a 42% downside to Friday’s close. Langan decreased his Tesla earning-per-share forecast to a loss of $3.30 from a loss of $1.60 for 2018 and to a loss of $6.40 from a loss of $5.30 for 2017. The automaker has not yet responded to request for comment.
Langan also wrote in his note, “With limited Model 3 profitability, infrastructure expansion needs, & Model Y capacity build (late 2019), we believe TSLA will eventually need additional outside funding. We see increased pressure on demand as luxury automakers launch competing products in the 2018-20.”