Tesla Just Can't Catch a Stock Market Break

Steph Willems
by Steph Willems

The brief uptick in share price Tesla enjoyed after beating production estimates this week was swiftly erased by a newly critical Goldman Sachs Group.

The investment bank downgraded the company on Thursday, sending its stock back down the hillside, Bloomberg reports. It’s bad news for CEO Elon Musk’s fundraising plans.

Goldman was spooked by Tesla’s $2.6 billion acquisition of solar energy company SolarCity. The bank, which managed the automaker’s $1.4 billion May stock offering, scrapped Tesla’s “buy” rating, replacing it with “neutral” after assessing the extra risk taken on by the automaker. It also cut Tesla’s price target from $240 per share to $185.

Naturally, Tesla’s stock bounced off the ceiling, reaching a five-week low. The stock started the week at $214.40, but ended it at $196.61. Another bank, Morgan Stanley, downgraded the company back in June.

Buying SolarCity is Musk’s way of realizing his goal of a company that can sell you the complete green lifestyle, but the acquisition sparked a harsh investor backlash. Too much risk at the wrong time being the chief complaint.

Musk wants extra money in the bank by the end of the year to help complete his battery-producing Gigafactory and prepare for Model 3 production. SolarCity’s need for cash to cover debt payments could weaken Tesla’s financial footing. Meanwhile, the Goldman downgrade threatens the automaker’s ability to raise more cash through future stock offerings.

Musk still needs shareholder approval to complete the SolarCity deal.

[Image: Tesla Motors]

Steph Willems
Steph Willems

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  • Robbie Robbie on Oct 09, 2016

    What do you guys think of the electric van put together by Deutsche Post: http://fortune.com/2016/10/06/volkswagen-electric-van-2/ Apparently, producing an electric vehicle is a lot easier than an internal combustion vehicle. Is there a chance that Tesla is more of the lean company that the future needs for producing electric vehicles, why the regular car companies are hopelessly oversized for this business?

    • See 14 previous
    • JimZ JimZ on Oct 10, 2016

      @heavy handle you should probably spend less time trying to tell me what I think.

  • Joe K Joe K on Oct 09, 2016

    Goldman-Sachs, the company that said mortgage backed securities were a great investment?

  • Don1967 Don1967 on Oct 10, 2016

    Tesla's stock got a HUGE stock market break when it soared to over $200 without a dime of profit. But we're reaching the part where, according to Benjamin Graham, the stock market stops acting as a voting machine and starts acting as a weighing machine.

  • SunnyvaleCA SunnyvaleCA on Oct 10, 2016

    Lots of luck to the "just can't catch a stock market break" people, but I think $30 billion market cap means you have already caught a major break. For a company to have consistent losses for 10 years in a row and still have a market cap of $30 billion is phenomenal. To me, Tesla has a very significant risk of never making it big and instead be sold off for parts for pennies on the dollar. To take that sort of risk on a startup, I'd want to think I had a chance of making a 10x return. But for Tesla to make 10x return they'll need a market capitalization as large as GM, Ford, Toyota, and Honda all put together.