(Reuters) – Goldman Sachs Thursday lowered its Tesla Inc price target by 21%, to the third second in the street, on concerns over the sustainability of demand for the electric car models.
FILE PHOTO: Tesla Superchargers are shown in Mojave, California, USA on March 1
Earlier this month, Chief Executive Officer Elon Musk told shareholders that Tesla was about to hit its volume production target for the year and had "a decent shot at a record block at each level".
Analyst David Tamberrino, Goldman Sachs, believes that the second quarter has witnessed a better environment for demand for Tesla's cars, but he does not think it is sustainable.
"Although there is potential upside surprise from a faster ramp or advance of the Model Y before the schedule, there is likely to be cannibalization of current model X and model 3 product needs with a crossover variant," Tamberrino wrote in a note.
Analysts have questioned whether there is a global demand for hundreds of thousands of model 3 sedans and other vehicles that Tesla's goal is to produce, after deliveries fell 31% in the first quarter.
"We believe it is the biggest question for investors to sign at this point – what are sustainable demand levels for model S, model X and model 3 – and how does it change with the introduction of model Y production" Tamberrino said.
The broker retained his "sell" rating on the stock and lowered his goal by $ 42 to $ 158, 34% below the median target, saying that Street is "still modeling for optimistic sustainable volumes for Tesla".
The Tesla share has seen more session gains in June than losses, a rare one for the company that has lost 33% in value so far this year. However, Musk's closest delivery ceilings lead shares back in time. June so far has been the best month since October for Tesla stock.
Tamberrino expects the downward spiral of stocks to resume, as it becomes clearer that sustainable demand for Tesla's products is below expectations.
The shares in the company were marginally lower to $ 226.10 in early trading.
Twelve of 31 brokerage houses covering the share price "buy" or higher, 7 "hold" and 12 "sell" or lower, according to IBES data from Refinitiv.
Reporting of Vibhuti Sharma in Bengaluru; Editing by Shinjini Ganguli