• 8 hours Gold Miners Are Having A Stellar Second Half
  • 1 day How 3D Printing Is Turning Each And Every Industry On Its Head
  • 1 day Is The $3.5 Trillion Healthcare Industry About To Get Much More Transparent?
  • 2 days Gamblers Are Betting Big On Trump’s Impeachment
  • 2 days Even Banks Can't Answer Aramco's Trillion Dollar Question
  • 3 days Will Bezos Buy The Seattle Seahawks?
  • 3 days 6 Tech Trends Transforming The Travel Industry
  • 4 days Ousted Uber CEO Cashes Out $500 Million In Stock
  • 4 days Trump Prepares For Another Key Tariff Decision
  • 4 days The Free Money Bubble Is About To Burst
  • 5 days The Crushing Reality Of Poverty In America
  • 5 days Should You Buy Into The World’s Largest IPO?
  • 5 days The Infinite Possibilities Of Cosmic Energy
  • 6 days Analysts Link Walking To Economic Growth
  • 7 days Will Japan Turn Its Back On The Aramco IPO?
  • 8 days Global Debt Soars To $188 Trillion
  • 8 days The World's Largest Gold Miners Are Getting Creative
  • 9 days Twitter: The Saudi Spy Tool To Bring Down Dissidents
  • 9 days Broad Commodity Funds Don’t Give Enough Exposure To Gold
  • 10 days Here We Go Again: Another Giant Telecoms Mega-Merger
Should You Buy Into The World’s Largest IPO?

Should You Buy Into The World’s Largest IPO?

The highly-anticipated Saudi Aramco IPO…

Oilprice.com

Oilprice.com

Writer, OilPrice.com

Information/Articles and Prices on a wide range of commodities: We have assembled a team of experienced writers to provide you with information on Crude Oil,…

Contact Author

  1. Home
  2. Investing
  3. Stocks

Tesla Stock Stumbles On Model 3 Cancellations

Tesls

Tesla (TLSA) stock price fell about 2.5 percent, after a Needham analyst, Rajvindra Gill, downgraded it with his concerns about an increasing rate of Model 3 cancellations, profitability concerns, and a flurry of electric-vehicle competition from traditional automakers.

These are not the only problems that Gill cited in his note to clients. Tesla is currently dealing with a significant number refunds that are outpacing deposits as cancellations accelerate because of the expiration of the $7,500 credit and unavailability of the $35,000 base model.

"In August '17, TSLA cited a refund rate of 12%. Almost a year later, we believe it has doubled and outpaced deposits. Model 3 wait times are currently 4-12 months and with base model not available until mid-2019, consumers could wait until 2020," Gill said.

“The notion that Model 3 cancellations are outpacing orders is unequivocally wrong,”, said Tesla spokesperson when asked for comment.

Even though various experts have said the car could be profitable, Needham doesn't think so. The firm cut its gross margin estimate for Tesla's total profit by the end of the year to 16.3%, well below the Wall Street consensus of 19.9%.

Just like other Wall Street analysts, Gill is also concerned about Tesla's cash burn, believing that Tesla’s capital structure is “unsustainable.” Tesla is still relentlessly claiming that it will be profitable in the second half of this year and will not need to raise additional capital, but analysts from Goldman Sachs and UBS have a different opinion. Related: BlackRock Goes Bitcoin

They are convinced that Tesla will probably have to raise another round of capital in order to pay off debt that is coming due and keep up production.

"We are downgrading Tesla to underperform from hold as we believe the stock is still overvalued despite falling 16% from its June 2017 peak (the S&P 500 is up 15% over the same 56-week period)," Gill said.

According to regulatory filing, Tesla burned through $1.1 billion cash in the first quarter of 2018, which is still a slower burn than in previous quarters, which amounted $1.4 billion. The company’s share price is down 8% since last month.

By Damir Kaletovic for Oilprice.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment