Shares of Tesla (NASDAQ: TSLA), -4.96% fell 4% Thursday. That loss came on the heels of a 7% gain late Wednesday after the electric-car maker reported a narrower-than-expected first-quarter adjusted loss and quarterly sales in line with Wall Street expectations. At the same time, 2 VPs of Tesla just left the company before it released the earnings.
In addition, the company moved up its goal to produce 500,000 cars to 2018, two years earlier than it had previously planned, and renewed its promise to have the Model 3 ready for production and sales by the end of next year.
Doubts crept in just after Chief Executive Officer Elon Musk laid out those promises, however, with some talking about how the man who wants to launch a rocket to Mars by 2018 has had some problems in the past with over-promising and under-delivering. In addition, two executives involved with production have left Tesla.
Tesla’s move to build out additional capacity and accelerate production makes sense given the high reservations for the Model 3, but “does not alleviate the degree of difficulty of launching a high-volume product,” analysts at Goldman Sachs said in a note Thursday. For this time, Tesla wants move from the battery only factory into a total new one that is capable of creating a massive new model 3 cars. As for this point, it is clear that the company with a 135x forward PE ratio will do another round of capital expense. Furthermore request of funding is not on the schedule for Musk due to his ambition which now the market didn't buy it as usual.
The mass-market car’s compressed schedule, to say nothing of a ramp-up in production, is already onerous for Tesla and leaves the company open to near-term execution risk, they said. The Goldman analysts raised their price target on the stock, however, to $250 from $245, about 17% upside from Thursday prices.
To fund its expansion, Tesla said it is likely to tap capital markets in the medium term. That’s what bears will key in on, analysts at Stifel said in a note. A capital raise, however, “would be completely reasonable in light of higher Model 3 demand than expected,” they said.