Tesla Motors, Inc.
) has received a "B-" credit rating from Standard & Poor's
Ratings Services. The rating is six notches below investment grade
and falls in the junk category. This is an unsolicited rating with
no input from Tesla regarding its future plans.
S&P assigned a stable outlook to the rating, which indicates
low possibility of a rating upgrade or downgrade in the near term.
The outlook is based on the projections that gross margins of Tesla
will continue to improve over the next year, as the company works
to fulfill the demand for Model S.
The low credit rating is a result of Tesla's limited market
share, small operating scale compared with other automakers, focus
on a niche product segment and uncertainty related to demand in the
long term. Moreover, the electric carmaker might face difficulty in
managing risks related to future technological displacement and
competition. Competition in the field of green vehicles is expected
to increase in the future, which will hamper Tesla's prospects.
According to S&P, these factors raise doubts about the
long-term prospects, despite the positive aspects of the
Tesla raised $2.3 billion from convertible notes issue in Mar
2014. Of these, notes worth $800 million are due in 2019 and the
remaining $800 million notes will mature in 2021. The company
issued the notes to partly finance its planned Gigafactory.
Tesla designs and manufactures electric vehicles and electric
vehicle powertrain components for partners such as
Toyota Motor Corp.
The automaker currently carries a Zacks Rank #4 (Sell).
Fox Factory Holding Corp
), a Zacks Rank #1 (Strong Buy) stock, is currently performing well
in the automobile industry.
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