Goldman Sachs: Tesla Needs $6B In Capital To Meet "Disruptive" Growth

by Cameron Aubernon

Published: September 25th, 2014

goldman sachs tesla needs 6b in capital to meet disruptive growth

According to the financial overlords of Goldman Sachs, Tesla would need an $6 billion in capital within the next 11 years should its products become truly disruptive to the automotive industry.

Per Bloomberg, Goldman Sachs analyst Patrick Archambault delivered that number to his employer’s clients Wednesday, based on what he believes would be needed should Tesla’s electric lineup prove as popular as the iPhone 6 or Model T. The proclamation knocked the automaker’s shares down 1.7 percent to $259.32 on the trading floor in New York at the final bell.

Though Tesla CEO Elon Musk plans to sell a minimum of 500,000 units per year down the road, Archambault claims the capital needed would push annual production from 1.8 million to 3.2 million units by 2025. Other projects, such as the upcoming Gigafactory battery pack plant in Reno, Nev., would also need some of the projected $6 billion in additional capital. He adds that most of the $6 billion would be distributed from 2017 through 2025.

Meanwhile, Tesla has not given its own forecast for capital spending, according to representative Simon Sproule.

#CapitalInvestments #GoldmanSachs #PatrickArchambault #Projections #Tesla

Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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12 of 29 comments

Conslaw on Sep 25, 2014

Tesla's market capitalization (the theoretical value of all of its outstanding stock) is already $31 billion. Most of that money the company never saw because it handed out the stock to insiders or the stock was sold early on when it was much less expensive. Still, it is likely that Tesla could raise all of the $7 billion in the stock market easily IF it were willing to devalue the shares of current stockholders. One way of minimize this is to do an issue of warrants (stock options) to current stockholders.

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- Heavy handle on Sep 25, 2014
  
  Exactly, 6 billion over 11 years is nothing if they continue to be successful.
  
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- Ihatejalops on Sep 25, 2014
  
  @heavy handle How the hell do they have a market cap like that? They only SELL about 25K cars total. A bubble methinks we're in. Plus, the globe is not demanding more batteries. A bubble methinks we're in. http://blogs.barrons.com/stockstowatchtoday/2014/09/03/tesla-motors-too-many-batteries-not-enough-demand/
  
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- Pch101 on Sep 25, 2014
  
  @heavy handle Tesla keeps generating losses. To refer to it as "successful" is a bit premature. The management is talented and the brand building has been solid. But they can't turn a profit and don't appear to be on track to make a profit. The market cap is simply ridiculous; the operations don't generate anything that comes close to justifying that stock price.
  
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- Heavy handle on Sep 25, 2014
  
  @Pch101 The market cap is based on the expectation of future growth and profit. Their current turnover and profitability is not a major factor since nobody expects them to be flat from quarter to quarter (unlike established players). Mind you, some people expect them to crash and burn, but that doesn't seem to have a huge effect on the market.
  
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- Pch101 on Sep 25, 2014
  
  @heavy handle You say that as if there is some rational basis for the projection that should be driving the valuation. In this case, there isn't. This is about the dumb money paying far too much for something that just doesn't pencil. Automakers need scale, and Tesla doesn't have it and isn't likely to get it.
  
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- Heavy handle on Sep 25, 2014
  
  @heavy handle Only fools claim that markets are rational. If you think that Tesla investors are "dumb money," then you can be the "smart money" and short the stock. This whole Tesla thing bring me back 15 years when people were having the same conversations about Amazon: "they've never made a profit" "it's all virtual money" "they won't be around in 5 years" "you can't make money in retail without brick and mortar" "industry leaders could build their own (web presence) and wipe (Amazon) off the map". All valid objections, all steamrolled by a determined company with a vision. Not saying history will repeat, but it could.
  
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- Pch101 on Sep 25, 2014
  
  @heavy handle Shorting a stock is generally a bad way to respond to the dumb money. It's hard to predict how dumb the market can be, or for how long. There are rational ways to value companies. You don't seem to be aware of them, but they do exist, and they are used much of the time. Tesla is a notable exception. Like the dot.bomb stocks of over a decade ago, there seems to be more hope than analysis going on here.
  
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- Dr. Kenneth Noisewater on Sep 25, 2014
  
  @heavy handle Blah blah blah, buy some LEAP puts and cash in if you're so bearish on TSLA.
  
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Conslaw on Sep 25, 2014

By the way, General Motors, Ford and Honda all have market caps in the low $60 billion range, about double Tesla's. Volkswagen's cap is $80 billion. In comparison, Toyota is a giant at $200 billion, but that's only half of Google's $400 billion cap. Apple is worth an additional Toyota at $600 billion, roughly 2 Walmarts. Do you love your PS4? Sony's market cap is under $19 billion, only 2/3s of Tesla.

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Stuki on Sep 25, 2014

11 years, huh. Precisely $6 billion! Wonder how much of the cost of that report the author will have to pay back when it turned out he was just pulling nonsense of of his rear? Of course, who cares about such pesky details as reality, when all money is created by the process of financing, and whether one gets financed depends on whether Goldman can pretend it's various assets are money good......

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95_SC on Sep 26, 2014

Screw it, If they are still around in 3-4 years I am going to shop them.

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