Tesla's Stock Tumbles Goldman Sachs Downgrade

By Markets MarketWatch Pulse

Shares of Tesla Motors Inc. slumped 3.5% in morning trade Thursday, after the electric car maker was downgraded at Goldman Sachs, which cited potential risks to Model 3 delivery timelines and free cash flow concerns. Analyst David Tamberrino cut this rating to neutral from buy, and slashed his stock price target to $185, which is 8% below current levels, from $240. The changes were part of a downgrade of the broader auto sector to cautious from neutral, citing the belief that the U.S. auto cycle peaked in 2015. For Tesla, Tamberrino said he is concerned about risks to the business related to management's decision to deploy capital for acquisitions, such the attempt to buy SolarCity Corp. . And any delay in launching its lowered priced Model 3 could also be "detrimental" to the stock price. "We believe the proposed combination of Tesla and SolarCity--two high growth, high cash burn businesses, creates a higher risk entity given the combined on-going capital needs and higher net leverage that would potentially result," Tamberrino wrote in a note to clients. The stock has tumbled 16% year to date, while the S&P 500 has gained 5.4%.

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