Tesla Gets a Downgrade on Model 3 Issues

Firm UBS has reiterated its “sell” rating on electric vehicle giant Tesla, citing that the company will have continued problems with its Model 3 vehicles.

Analyst Colin Langan wrote in a note to clients on Monday, “We believe the market should not ignore fundamental challenges that persist with regards to Tesla’s Model 3 profitability, stationary storage & solar businesses, and eventual need to raise cash.”

“Not only does the [Model 3] miss undermine the credibility of future Model 3 targets, but it increases the near term risks,” he wrote.

“We believe the market should not ignore fundamental challenges that persist with regards to Tesla’s Model 3 profitability, stationary storage & solar businesses, and eventual need to raise cash.”

UBS has a 12-month price target of $185 on the stock still. He lowered his financial results estimates for the
company due to the “slower Model 3 ramp.” He now forecasts a loss of $6.40 per share from a loss of $5.30 for 2017 and to a loss of $3.30 from a loss of $1.60 for 2018.

“With limited Model 3 profitability, infrastructure expansion needs, & Model Y capacity build (late 2019), we believe TSLA will eventually need additional outside funding,” he wrote. “We see increased pressure on demand as luxury automakers launch competing products in the 2018-20.”

Tesla shares felt the burn of the note on Monday but are up about 50% for the year.

Disclaimer: We have no position in Tesla Inc. (NASDAQ: TSLA) and have not been compensated for this article.