Markets

Tesla (TSLA) Shares Fall on Downgrade by Goldman Sachs

Market charts plus calculator

Tesla Motors, Inc. 's TSLA shares fell 3.58% to $201.00 on Oct 6 after Goldman Sachs downgraded the stock to "Neutral" from "Buy", and reduced the 6-month target price to $185.00 from $240.00.

The lowered rating was based on concerns related to the proposed acquisition of SolarCity Corporation SCTY . Given that both Tesla and SolarCity have a high cash burn rate, the combined company would have significant capital needs and high leverage, creating significant risks. Moreover, the Model 3 launch is approaching and expanding the scope of the company's operations at this stage may lead to risks. Particularly, a delay in the launch of Model 3 will weigh significantly on the stock. However, Goldman Sachs conceded that the acquisition would result in some synergies, particularly from lower customer acquisition costs.

The downgrade of the auto sector's rating to cautious from neutral also played a role in Tesla's downgrade. The sector's rating was reduced on concerns that the cyclical auto industry reached a peak last year.

TESLA MOTORS Price

TESLA MOTORS Price | TESLA MOTORS Quote

Tesla currently carries a Zacks Rank #3 (Hold). Some better-ranked auto stocks include Cooper-Standard Holdings Inc. CPS and Motorcar Parts of America, Inc. MPAA .

Cooper-Standard has witnessed positive estimate revisions in the last 60 days. It also posted positive earnings surprises in the last four quarters, resulting in an average beat of 51.17%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Motorcar Parts has seen its estimates move north in the last 60 days. The stock, with a Zacks Rank #1, has a long-term expected EPS growth rate of 23%, which is better than the industry average of 12.3%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

TESLA MOTORS (TSLA): Free Stock Analysis Report

MOTORCAR PARTS (MPAA): Free Stock Analysis Report

SOLARCITY CORP (SCTY): Free Stock Analysis Report

COOPER-STANDARD (CPS): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

TSLA MPAA CPS

Other Topics

Stocks

Latest Markets Videos